Here are the topics I cover. Each is titled, so you can scroll down if you are only interested in one these:

• A jump in the CPI even as demand falls? Consumer prices may rise in the short term, even as expenditure is falling – and this “price level” change is not necessarily indicative of a supply shock.
• How to visualize the “timeline” of COVID-19 and the economic elements.
• What does ECON101 think?
• On humility: During the health crisis public health experts are the primary people able to analyse the issue and help with policy. Economists main role remains defining the trade-offs, but not deciding policy.

I don’t want to state what policies I think are good and which are bad. Instead I just want to share these points, as they are ideas I am using to understand what different policies might be trying to achieve as an interested person.

CPI, shortages, and demand shocks

COVID-19 is creating shortages in situations where production has not been influenced. Stating this, and noting as Kopczuk does that some prices are adjusted upwards, make it sound like a positive demand shock.

Let’s see if this is the case. If it was I would have been wrong, and a lot of the present international policy discussion would also be wrong. But instead, I think there is a negative demand shock and the lift in demand for these goods now is associated with:

• people shifting consumption of these items forward for fear of pandemic.
• people also avoiding other types of activities (eg cafes).

If prices are sticky downwards, the composition of that shock means we may observe the price level may go up, even though overall expenditure is not!

Furthermore, in the very near term that lost other activity remains lost, while the activity that is shifted forward will leave an additional hole in demand.

So is it true that discretionary purchases (as opposed to things that are seen as essential) have dropped – in the US lets look at restaurant bookings.

And what about if we stop talking about individual items and ask about market expectations of inflation and interest rates on the basis of COVID-19? For this the next two tweets give a strong indication that there is a large negative demand shock.

How to visualize the “timeline” of COVID-19 and the economic elements.

In my first post on COVID-19 I discussed the idea of two separate shocks – the demand shock associated with the pandemic overseas, and the supply and demand shocks associated with the pandemic arriving onshore.

When discussing the specifics of these shocks, the potential importance of business continuity was raised.

The important distinction was between when the pandemic is here (activity needs to be lower due to supply shock) and when it is offshore (when it is mainly a demand shock).  If it stays offshore (unlikely) we would need to balance the above facts when making a monetary policy decision.  When it comes here we will have a recession, but that is because some income is “lost” due to us all being off sick – that doesn’t mean monetary or fiscal policy can bring it back, instead the question is about who bears the burden of that loss.

However, I think the following tweet that shows a stylised timeline of these shocks is really useful for helping think through these issues.

That tweet thread has further discussion based on tweeting economists – but to me that graph is a powerful tool to guide thinking.

But this also raises a question, is the agreement among economists that COVID-19 will cause a recession due to the expected loss from “protecting health” (e.g. closing businesses, social distancing) or because of a demand shock?

To my mind the importance of the demand shock can’t be ignored – given what has happened to the yield curve (as noted above).

But even if there is no negative demand shock and the economy does rebound we would expect to see a recession from a pandemic. Preventing a “technical recession” is not always what we want to do – especially when there is a trade-off for other aspects of wellbeing (health).

ECON101 thoughts

The current Harvard intro economics lecturer noted the following.

Greg Mankiw is the former intro economics lecturer at Harvard. The Mankiw post is here.

In the post Mankiw repeats the recession point above but also pushes another important point – this is about social insurance (eg payments made to people who suffer from the consequences of COVID-19).

Let’s think about a pandemic as a natural disaster. This is unexpected and either is uninsurable, or individuals act as if they expect the broad community to share in the cost. As a result, any policy response is about, in some sense, who pays the cost of this disaster. There are two elements here i) fairness, and ii) “coordination failures”.

I asked Matty if he agreed as he also teaches intro economics. He said he did, although he said in class he would also note an additional factor. If monetary policy wasn’t able to stabilise demand, then they might need to coordinate with fiscal decision makers.

So I think that is a large enough sample of intro micro lecturers to call this a consensus on the importance of social insurance!

The social insurance policies are the ones that determine how the burden of the shock is distributed, and insofar as they help with coordination failures (eg increasing the ease with which people can take sick leave) they can also increase efficiency.

On humility

There is more discussion on the full thread.

I agree with Alfredo, as I noted here:

What becomes much more important for policy is identifying coordination failures.

The clearest example is with regards to how to stop or slow the spread of the virus, as a communicable disease implies there are externalities from an individual’s choice.

Let’s say employees and employers are averse to using sick leave – but not using it increases the chance of transmission which has an externality.  Do we need to advertise the importance of taking leave? At what point are schools and public offices closed? When are non-essential services closed to limit the spread of the virus?

These are public health issues, where what might be best for the individual has severe consequences for the other individuals around them – and so restrictions could be necessary.  But how to judge that?

No GDP figure, or appeal to demand and supply can inform us on that question – so when the virus reaches here the government’s main role is in making judgement calls about these trade-offs.  And the some of the best advice will come from epidemiologists and public health professionals regarding these specifics, not so much economists.

Allowing the public health authorities to manage public health, and then deal with the allocation issues that come from it is preferable than just trying to “protect the economy” as some US presidents have been suggesting – and some businesses closer to home have potentially been implying!

The brief story is that when the World Bank provides financial aid to aid dependent countries, some of these funds appear to be transferred into the private accounts of the “elites” in the countries mostly known as “financial havens”. She then left because the research on this issue wouldn’t be published by the World Bank.

At a first glance it looks like the World Bank wasn’t directly involved in the actual corruption of determining where the final aid funds have ended up. But they appear complicit, as the Bank refused to release the data on it, until recently. This came out as a story as if the Bank is supportive of the idea of sponsoring failed development projects and self-interested elites. 

As I have noted, I am very regretful that we have lost a female economist. As a female economist myself, I know there are significant areas where we are underrepresented in the economics field. With the PhD from Stanford University, Prof. Goldberg has contributed significantly to the literature on International Trade. Her theoretical and empirical approach and mindset is something other female economists, like myself, aspire too.

When her name got involved in the scandal, she immediately resigned, although her personal involvement on this scandal (in terms of suppressing the research) is likely to have been minimal given she was so newly appointed to the role.

Giving up such a significant role to stand up for what is right – and the release of research even when it isn’t popular for the client – is something I have a lot of respect for. 

What evidence have we got around the financial aid leakage?

Not long after the resignation, the World Bank released the empirical paper analysing whether aid disbursements trigger money flows to foreign bank accounts.

The paper found that when the country received a financial aid, its bank deposit in financial haven countries increased significantly as opposed to a country which hasn’t received the aid, learn about why your zelle payment funded but not received. With caveats, the overall message from the paper is that financial aid to aid dependent countries is partially diverted to private accounts in tax havens rather than spent on the needy – which is corruption. 

Why should we care?

We care because there can be unintended consequences from aid when there are institutional issues, and how important it is to understand whether the aid is going to those in need – or being used to increase the power of the wealth in these jurisdictions. 

If a sizable portion of World Bank aid is used to prop up the wealth of the “strongmen” or “elite” in undemocratic countries, then the aid may be making the lives of many people worse rather than better – not a pleasant thought, but one we have to face if we genuinely care about the poorest people in the world.

Such purchases are predominantly with regards to foreign exchange – so there are related asset transactions on a forex market, and within a domestic market. However, I’m going to use the term a bit more broadly – as with a variety of forms of asset purchases by central banks, I think the term has a broader relevance.

Sterilized intervention is when the central bank makes a purchase of an asset, then sells a corresponding asset to try to keep the “money supply” fixed.  So the idea behind sterilization is that it should NOT have monetary policy effects.  However, there may be a reason why the change in the asset composition of the central bank’s balance sheet is important for its “bank regulator” role.  

As an example, Central Bank of China uses sterilized intervention to lower their currency but keep domestic monetary policy going.  In that context this is also a form of “capital control” in terms of the impossible trinity (trilemma between a fixed exchange rate, free capital flows, and monetary policy independence).  We may do this to reduce volatility in exchange rates, or as a form of “illegal” trade policy (in a simple language, this is forcing domestic citizens to save in order to build up reserves and generate trade surpluses).

When the central bank uses an unsterilized intervention this changes the money supply in economy.

An example of this could be a helicopter money drop. The increase in the amount of money leads to a real balance sheet effect.  This example is when government just credits households’ bank account, which incentivises the latter to spend. 

In this case, there is no need to worry about Ricardian Equivalence as the government doesn’t borrow to cover off the money supply.  If output was fixed this would merely lead to prices going up – but if there are factors of production being “left idle” it can lead to output.  Hence why unsterilized intervention  expected to lead to  increase in “planned expenditure”.

Forex fits into this space because the unsterilized intervention in turn increases the “supply” of money (all other things equal) which can be used for the purchase on goods and services with that fiat currency. As a result, unless that currency is held externally as an asset it will in turn increase demand for the goods and services in that economy.

Life in New Zealand pic.twitter.com/Fnt30ZCKR0

— Owen Williams (@ow) July 22, 2014

This is true, shipping is a pretty big deal.  However, Aaron Schiff pointed out another common cost of being in NZ:

@ow @tanya hey, at least this item is available in your country …

— Aaron Schiff (@aschiff) July 22, 2014

This is of course the curse of distance – both from the “production” of goods and from large centres of “consumption” (where the fixed cost of transporting can be spread over more customers).  The OECD has discussed this cost before, and NZ’s Productivity Commission also mentions it when discussing why productivity in New Zealand is relatively low.

Nice to see Amazon giving us some concrete examples we can use to discuss the phenomenon though – well nice until you want to buy anything

Intro

I’ve been asked to talk about the ‘mistakes made’ with regards to the Global Financial Crisis, and the ‘financial architecture.  Let us start off by not assuming a mistake per se, but in asking what type of narrative describes what we experienced – from that we can try to describe what can be seen as a mistake.  Furthermore, the term “architecture”, or “infrastructure”, also presupposes something about the nature of financial institutions – and directly implies it is something that needs to be built, making it sound as if we need a central organisation to do it.  While there might be some truth in that, it is not where I’d prefer to start with any discussion.

Focusing on supranational, undemocratically determined, institutions for “solutions” to a policy problem misses the point – yes the world is integrated and national level institutions need to coordinate more, but focus needs to be on national policy when discussing mistakes.  As Dani Rodrik says, it is up to nations to keep their house in order, not other countries.  If anything the crisis in Europe shows the shortcoming of supranational regulation, given the true democratic mandate is a national one.

Even after a crisis the key thing we need to ask is what narratives fit our data, so we can build an understanding of what the impact of (national level) regulatory policy could be.  For an example of how this matters, say that if a financial crisis is like an earthquake – in that case we may believe that policy actions that help to insure people against the costs are appropriate.  Instead, assume that a financial crisis was due to the risky choice of individuals and organisations – then we would want policy that makes these people bear the costs of their choice.

The “truth” is between these, so let’s talk about these narratives.

The financial system

The GFC should not have changed our view of broad view of what financial institutions are.

The purpose of the financial system is as a market – as place where individuals and groups who want to save match up with individual and groups who want to borrow.  The institutions in the middle are financial intermediaries – and their role can be viewed in a number of ways:

1. By screening the quality of borrowers, and doing so with the economies of scale of a large institution, they provide a cost effective service for those who want to save.
2. Due to their scale, financial institutions are able to diversify risk – which individual depositors may not be able to do if they lent directly.
3. Maturity transformation:  Financial institutions, due to their size, are able to “lend for the long term” and “borrow for the short term” as long as depositors have faith in the institution – this ‘maturity mismatch’ creates value for both lenders and borrowers.

There are broader points about banks offering a ‘risk-free rate of return’, determining the money supply, inflation-protection of savings, and offering financial services – these are important issues when thinking about regulation, but are a bit beside the point when we are focused on the GFC directly!

The question we are focused on is around the “mistakes” made by policy during the Global Financial Crisis.  We can split mistakes into two categories:

1. Mistakes in terms of policy during the crisis.
2. Mistakes in terms of regulation and policy in the lead up to the crisis.

This separation is very important, as it helps to give us a perspective on the way policy and institutions can be changed to reduce the chance of a similar crisis – and also helps us to think about the cost of these regulatory changes!

The catalyst of the crisis

When thinking about the crisis kicking off, a lot is made of subprime mortgages, and non-recourse mortgages (so the debt is against the collateral in the house, not pinned to the individual borrowing).  Although housing is an important asset class (and the structure of mortgages did influence the way the market adjusted), it is more useful to think about these events in more general terms if we want to consider the financial infrastructure more generally.

• Lehman Brothers and the failure of AIG
  • Crisis had kicked off in mid-2007 with the housing market slowing in the US and BNP Paribus (in France) running into a liquidity crisis in August.
  • Northern Rock in February 2008 and the Bear Sterns event in March 2008 – still debate about whether the bailout exacerbated risk taking in the lead up to September, or whether it did prevent a crisis as of March.
  • Failure of LB after Barclays refused to buy at the last minute in September 2008.  Led to the near failure of AIG, an insurance company that had essentially been insuring a sizable chunk of the shadow banking system.
  • “Oil price shock”.  The steep run up in oil prices during 2007/08 was also a major, and often underplayed, cause of the global recession in late 2008/early 2009.  The magnitude of this shock was underplayed at the time, and was part of the reason why the slowdown heading into during 2010/11 was also more intense than anticipated (oil prices were rebounding at this time).

The response

After it became apparent that the failure of Lehman Brothers had done irreparable damage to AIG, faith in the entire financial system collapsed.  The rapid nature of the response by global economic authorities is captured in a book called “the alchemists” by Neil Irwin.  This gives a good run down of what happened through the narrative of the US, UK, and European central bankers at the time.

A combination of monetary policy easing, currency-swap agreements between central banks, significant new liquidity facilities (eg accepting lower quality collateral when giving loans), and direct purchases of some institutions (where shareholders value was essentially wiped out – but bondholders retained their claims) were all implemented in the wake of the Lehman Brother’s crisis.  Together, these policies helped to stabilise the financial system.

Fragile by design or nature?  Why not both.

The response to the crisis was largely appropriate.  Actions by the Federal Reserve and US Treasury helped to stem what was a “bank run” in the shadow banking system.

Shadow banking system:  “Shadow banking, as usually defined, comprises a diverse set of institutions and markets that, collectively, carry out traditional banking functions–but do so outside, or in ways only loosely linked to, the traditional system of regulated depository institutions – Bernanke”

The idea of a bank run in the shadow banking system was popularised by Gary Gorton.  He noted that one of the key reasons the crisis had such a broad impact on the financial market is because of the nature of shadow banking, and the way the line was blurred between commercial and shadow banking – namely that commercial banks would use the shadow banking sector for a significant amount of their interbank lending and borrowing activity.  One of his views was that the shadow banking system evolved to avoid regulation (rather than being the result of lax regulation per se) – which gives him the conclusion that we simply need to extend regulation to capture the shadow banking system.

Of course, this is far from easy – trying to regulate a specific industry is like trying to squeeze a lemon with your hand and keep it contained, the harder you squeeze the more bits leave your hand completely.

When faced with a bank run in a situation where large parts of the financial system are inherently “solvent” but facing problems of “liquidity” a government can improve outcomes by saying they will not let the organisation fail.

Illiquidity:  When an institution would, if holding its assets to maturity/selling at a ‘normal’ point of time, would be able to cover its liabilities.  However, during a crisis the institution is unable to sell its assets at a sufficiently high value to meet its liabilities.

Insolvent:  When an institutions liabilities would exceed the value of their assets in normal economic circumstances.

A bank run leads to a coordination failure for solvent firms with liquidity issues – if people were not pulling their funds out of a solvent financial institution, then it is in investors interest not to take out their money.  But if everyone is taking out their funds, the institution is forced to sell assets at “firesale” prices, making it in the investors interest to pull out as soon as possible!  This illustrates that the importance of the bank run is closely related to the idea of maturity transformation (or maturity mismatch) discussed above!

Note:  It can be hard to separate the two – given that insolvency may only become clear during a crisis!  When Bagehot came up with this in in the 19^th century he was clear that insolvent institutions should be allowed to fail, but modern regulators realise judging who is “insolvent” is unclear.

Mistakes leading up to the crisis?

However, we can’t just think of these issues at a point in time – the existence of a guarantee in the case of failure changes how we all view institutions.  If such a bailout is expected, depositors with financial institutions are willing to accept a lower rate of return – as a result, the entire financial system ends up taking on more risk.

This is a version of “moral hazard” and stems from the financial system (and depositors) being implicitly or explicitly insured by central government.

While there is this policy view of risk, there is also the more general ideas of “externalities” and “systemic risk”.

The key concern here is, even if firms were appropriately taking into account risk, they do not take into account how their failure could impact upon other institutions.  In this case, there are two issues of note:

1. A type of externality where the risk taking of one financial institution negatively impacts on other institutions.
2. A “cascading failure” in financial institutions due to the interdependence of firms – implying that in the face of a “systemic event” the failure of one institution could lead to the failure of the entire financial system.  This is similar to the idea of bank runs – and again a clear difference between “liquidity” and “solvency” needs to be taken into account.

However, it is clear that the policy and the market risks play off each other – the general unwillingness of policy to let institutions fail incentivises risky lending which makes the financial system more fragile, both in terms of having “too big to fail” (TBTF) firms and “too interdependent to fail” (TITF) firms. [Note this is very different to the Great Depression, where it was the fact firms were too small, and so were all treated the same independent of actual quality, that helped drive mass bank runs – these issues are often unclear!].

We can only say there is a “policy mistake” if we are clear about the goals of policy.  There are some key points that come from our narrative:

1. Some of the advantages of financial intermediation also increase fragility – implying there is, along some margin, a trade-off between efficiency and stability (eg maturity mismatch)
2. Although we have split the failures into three categories (regulatory, externality, systemic event) the three are intrinsically related and can feed off each other.
3. We need to be clear about the difference between insolvency and illiquid institutions – financial institutions should be able to fail, and if an entire financial system was “insolvent” the decision about what to do is actually a conversation of who should bear the burden for the loss.
4. More generally our “pre-emptive” solutions depend strongly on what we believe the cause of the crisis is – if financial firms require regulation, regulation should be tied strongly to a perceived failure.
   1. In this context, clear capital ratios for banks have attractive properties – current policy about matching maturities, LVR limits, core funding ratio, risk-weighted capital ratios all justified in this light.  However, questions about how much the central bank should be “determining risk tolerance” for private institutions – something that makes the Admati & Hellwig (in The Bankers New Clothes) suggestion of a general capital/equity ratio more attractive, as it is based largely on the view that it is the “favouring of debt financing to equity financing of lending” driving a lot of the issues down the line (TBTF, risky behaviour).  Eg firms have the incentive to become TBTF solely because of the implicit subsidy on debt financing, through the lender of last resort and tax status of this funding.
   2. However, capital requirements will still lead to excessive risk taking – although they may be helpful they are not the silver bullet that some may claim.  A recent paper by Josh Hendrickson (http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2014/2/v34n1-7.pdf) points out that one of the key issues is to ensure that bank shareholders face losses that are commensurate with the risks they took on in the face of a negative outcome – his suggestion is to replace limited liability with contingent liability.
   3. Note that Josh’s suggestion would help to deal with the typical moral hazard issue, but not necessarily with the fundamental issues of systemic risk – and expectations of a policy response in the face of a systemic event (which then leads us back to moral hazard).  It is along these lines that the RBNZ is trying to clarify rules with the Open Bank Resolution.

An inability to get lenders and borrowers to see eye-to-eye:  The case of Europe

However, the crisis did not end up finishing at this point.  After the global economy recovered sharply during the second half of 2009, events in Europe took a life of their own.  There are two clear narratives that given for the fact that global economy continued to struggle in the intervening five years:

1. A failure of monetary/government policy.  This includes the delays to implementing forward guidance, the fiscal tightening in a number of countries, and the issues of “coordination” with regards to policy between countries.
2. Policy and regulatory failure in Europe that kept acting as surprise “negative shocks” for the rest of the world.

The European Crisis was in many ways a different beast, as the concern was about whether individual nation’s government would pay bondholders.  An unwillingness to define whether the burden of “bad government debt” would fall upon bondholders, bank shareholders, or taxpayers created a situation of uncertainty – and led to a seizing up in financial markets.

Disappointingly, the events in Europe didn’t teach us particularly more about the Global Financial Crisis.  Instead, the primary additional (and extremely costly) lesson of the European Crisis was simply that the institutions involved in European governance are weaker than we had realised.

Cuba provides an interesting case study in how government policies can help individuals coordinate in their choice of job and educational attainment.  However, it also shows some of the costs of trying to generate a “dynamic comparative advantage”: the misallocation of human capital as people are pushed into specific areas, the restrictions to freedom required to solve the time inconsistency issue between government and the service providers, and ultimately the risk of being exposed to an industry ‘picked’ by a government.

In truth is does appear that one of the key issues, when looking at how the system works, is the freedom of choice of the individuals involved – understandably, people’s beliefs and judgement around this in ethical terms should drive their view on what is appropriate.

New Zealand’s small size and exporters reliance on homogenous goods actually makes the country relatively resilient to global economic shocks – an important point to keep in mind when demanding that the government interfere to “restructure” or “rebalance” the economy.

However, he does touch on the idea of terms of trade shocks, and the justification for insurance.

Then Matt wrote up a guest Top-ten at ten last week.  In this, he focused on trade during the Great Depression and now – before swinging to a couple of posts by Aaron Schiff and Eric Crampton discussing the importance of competition to domestic industries.  That can in turn be expanded by thinking about services and the changing nature of scarcity.  At the end of it all he concluded:

We are moving into a world where trade in services is becoming more important, more valuable, and where it is removing the burden of distance from New Zealand firms.  The fact the world is changing, and that New Zealand firms and households have to be prepared to change with it, is an important point to keep in mind – both in terms of what we can expect, and what policies government should be putting in place.

It is this sort of recognition that makes economists get so wound up about global income inequality rather than income inequality within a country.  This is why it came up in the second part of my “careful with occupy” plea in NZ back in 2011 – because I guess that is the sort of way we’ve been trained to view these equity issues.  When economists talk about equality of opportunity (which is a value judgment – so we are wandering out of our strict specialty here) we are viewing all people as equal, irrespective of the country – and this is why development economics is such a massively popular field, and I can fully understand and appreciate that.

Let us take someone working every week of the year, 40 hours a week, on the current minimum wage ($13.75 per hour).  Assume they have no kids and the such, so we are just talking about an individual.  That gives us gross income of $28,600pa.  Now go here, and we get tax of $3,710pa.  Take off the ACC levies, that is $486.20.  Add on the independent earner tax credit, so $520pa.  Ignore any other payments.  This gives us net income of $24,923.80pa.

This result would put you in the top 6.53% of the income distribution over the world.  You would be among the 6.53% of worlds richest people, if you work in NZ on the minimum wage full time.

This in term does ignore two things:

1. The fact that goods prices tend to be higher in wealthier countries – so this factor will be exaggerating how wealthy the NZer is (as we actually care about goods and services)!
2. It also ignores that the tax that is paid is used to fund health care, education, etc etc.  These are “goods and services” that are provided which people is much poorer countries do not have access to.  As a result, this factor will be making you look less relatively wealthy than you actually are!

Perspective, it’s interesting.

• The initial post.
• Tyler Cowen’s thoughts.
• The R-R reply. (Here)
• A post suggesting that it mattered for policy settings.

All very nice.  Depending on the message people were trying to sell they either said the result was meaningless, or central, so I don’t think this makes any actual difference.  Honestly, without clear causal drivers there just were not good evidence based claims for actual policy adjustments – a lot of people were actually just saying we need to do X based on their preconceptions.  And they found this correlation either something that supports that (somehow) or something they need to rule out.

Over the last few years I have seen authors, at different times, use R-R as central to their argument on one thing, and then dismiss it for arguments regarding other issues (I’m not going to name names).  For example, you can’t use this result to say we need more savings policy because the stock of debt is to high, then complain that the study is flawed when you want more government borrowing … just focus on the actual core elements of your frikken argument instead!

My problem with the result isn’t the excel errors, or anything R-R appear to have said – it is the way it has been used as an inconsistent marketing tool by people for selling their own unrelated ideological policies.  I’m just hoping that this shuts that up.

As a side note, here are my feelings on twitter:

People who think the R&R result caused austerity overestimate the impact evidence has on government policy.

The lessons for the present are clear. Today most advanced industrial economies remain, to varying extents, in the grip of slow recoveries from the Great Recession. With inflation generally contained, central banks in these countries are providing accommodative monetary policies to support growth. Do these policies constitute competitive devaluations? To the contrary, because monetary policy is accommodative in the great majority of advanced industrial economies, one would not expect large and persistent changes in the configuration of exchange rates among these countries. The benefits of monetary accommodation in the advanced economies are not created in any significant way by changes in exchange rates; they come instead from the support for domestic aggregate demand in each country or region. Moreover, because stronger growth in each economy confers beneficial spillovers to trading partners, these policies are not “beggar-thy-neighbor” but rather are positive-sum, “enrich-thy-neighbor” actions.

I’ve heard this point a few times in the past (here, here, here, here, here, here) … and those are just the links on this blog ;).  You’ll also note that the third one quotes Bernanke … so hearing him say this is hardly surprising.