Friday, November 18, 2011

Readings for 11.21

Here's a few articles about the state of the auto industry:

This one tries to define the current state of the industry.

This one talks a bit about the bankruptcies/bailouts.

That should be enough, but post some more things on your blogs if you find something interesting. Bring your questions as well.

And remember to bring your computers on Monday.

Update: One more (unrelated) thing that you might find interesting. The European Central Bank has a game that allows you to play the role of a central banker. The game reveals a number of things about the bank that are important.

First, the only indicator that matters for your score is inflation. This is because unlike the Fed, the ECB has only one mandate, namely, to provide 2% inflation (although the Fed is not acting like it has a dual mandate recently).

Second, the challenge of the game is that inflation is like a raging bull--it's always fluctuating all over the place and often very hard to control. There's no reason to assume that inflation would act like this in normal circumstances and, furthermore, it's the job of the central bank to help manage inflation expectations and thus keep it stable. So in a way, the setup of the game already assumes in advance that the ECB is not doing part of its job. This probably explains any reluctance to do major action to address unemployment even on the part of the Federal Reserve--the sense that inflation might fly out of control, and that it will not be possible to reign this in for a long period of time, is deeply ingrained.

This article critiques the premise of the game. 

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