tag:blogger.com,1999:blog-5713178645208582139.post5749651677308729329..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: The Wrong Debate: Helicopter Drops vs. Quantative EasingDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger22125tag:blogger.com,1999:blog-5713178645208582139.post-80534600402872684932014-10-14T14:21:59.959-05:002014-10-14T14:21:59.959-05:00The question of inequality is more a cosmic and mo...The question of inequality is more a cosmic and moral one than an economic one. The DISTRIBUTION of consumption/spending is far less macroeconomically significant than the quantity of it-- the area under that curve.<br /><br />There's a lot that can hide behind a simplistic figure like median nominal wage, I think it would be a poor metric to choose.<br /><br />The President's choice to JLHhttps://www.blogger.com/profile/04468377270215680989noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-46905584643275946352013-12-11T08:44:37.103-06:002013-12-11T08:44:37.103-06:00I'm in the Krugman camp, although I would say ...I'm in the Krugman camp, although I would say that I could most definitely use $10,000 check from wherever.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-32962172488815789492013-12-11T01:02:30.897-06:002013-12-11T01:02:30.897-06:00“So the more precise statement I should have said ...“So the more precise statement I should have said is that a NGDPLT implies a commitment to permanently raise the amount of monetary base, if needed.” Hurray. Brilliant. That’s pure MMT.<br /><br />I.e. MMT says that given excess unemployment, the government / central bank machine should print and spend money (and/or cut taxes). Second, it should continue doing that till unemployment hits NAIRU. Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-14566178117823513392013-12-10T16:51:33.255-06:002013-12-10T16:51:33.255-06:00This analysis is simply wrong. Why can't the ...This analysis is simply wrong. Why can't the smart people in this discussion understand their errors?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-39149970717065871752013-12-09T14:58:30.640-06:002013-12-09T14:58:30.640-06:00David,
A priori, this sets up conditional probabil...David,<br />A priori, this sets up conditional probabilities on the Fed hitting its target:<br /><br />If the Fed succeeds, the prob. of the base increase being permanent is near zero.<br /><br />If the Fed fails, the prob. of it being permanent is near 1. <br /><br />Faced with these conditional probabilities, what should be my expectation of the Fed's success or failure? Wouldn't it beDiego Espinosanoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-64517456833142592542013-12-09T08:34:13.220-06:002013-12-09T08:34:13.220-06:00"I do see higher corporate profits behind hig..."I do see higher corporate profits behind higher asset prices, but I think that has little do with monetary policy."<br /><br />The Tobin Q Channel of the Monetary Transmission Mechanism (MTM) suggests that monetary policy can raise stock prices which in turn can increase investment. In turn the Kalecki Profit Equation suggests that investment can be a causal force in driving Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-11672653426682224912013-12-09T08:09:47.386-06:002013-12-09T08:09:47.386-06:00Krugman agrees:
http://krugman.blogs.nytimes.com/...Krugman agrees:<br /><br />http://krugman.blogs.nytimes.com/2013/12/09/helicopters-dont-help-wonkish/Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-80944022100058797922013-12-09T07:08:42.080-06:002013-12-09T07:08:42.080-06:00PierGiorgio Gawronski,
Yes, really it comes down ...PierGiorgio Gawronski,<br /><br />Yes, really it comes down to a central bank being willing to do whatever it takes or simply a regime change. And as I noted in a reply to comment above, the permanency of the base injection is conditional on it being needed. That is, a credible commitment to doing whatever it takes might create a self-fulfilling prophecy by raising the velocity of base money. In David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-47857954572830286302013-12-09T07:04:11.909-06:002013-12-09T07:04:11.909-06:00D. Tohmatsu,
I agree with your points on the incr...D. Tohmatsu,<br /><br />I agree with your points on the increased financial intermediation and inside money creation being a transmission mechanism. It was implicit in my discussion above. If you look at the links over the right side under the safe asset category, you will see I have written similar post.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-46084025535834853852013-12-09T07:01:13.002-06:002013-12-09T07:01:13.002-06:00Anonymous:
I don't see asset prices overall a...Anonymous:<br /><br />I don't see asset prices overall as over inflated. I do see higher corporate profits behind higher asset prices, but I think that has little do with monetary policy. <br /><br />The reason a permanent increase matters is because it permanently shifts nominal income and the price level. And this matters for several reasons. One, since many contracts are done in nominal David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-45057086066150281732013-12-09T06:51:09.943-06:002013-12-09T06:51:09.943-06:00Rob:
Yes, the demand demand to hold base money is...Rob:<br /><br />Yes, the demand demand to hold base money is an important part of the story. So the more precise statement I should have said is that a NGDPLT implies a a commitment to permanently raise the amount of monetary base, <i>if needed</i>. That is, it creates the expectation that if the market itself does not self correct through a higher velocity of base money, then the Fed will keep David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-64356875044883971522013-12-07T18:09:29.535-06:002013-12-07T18:09:29.535-06:004. Should read......If the Fed exchanges money for...4. Should read......If the Fed exchanges money for financial assets with the banking sector it will have no effect ...Dan Thomashttps://www.blogger.com/profile/01354902389242286031noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-84240611758258952892013-12-07T06:54:19.600-06:002013-12-07T06:54:19.600-06:00Perfect. No disagreement. Except ...
One could a...Perfect. No disagreement. Except ... <br />One could also argue that the concept of 'permanent’ could be defined in a different way. What is it that people want really? They want more liquid assets in the CURRENT state of the world. Maybe they're worried about the future... But if there is a shift to a world of full employment and growth, they may want to rebalance (raise) their PierGiorgio Gawronskinoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-83354465993298901982013-12-07T04:20:21.964-06:002013-12-07T04:20:21.964-06:00Yep.
Love the top graph.
Also really like your i...Yep.<br /><br />Love the top graph.<br /><br />Also really like your introducing the concept of "IOR sterlization" by analogy with Forex market operations sterlization. Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-53434468698984275302013-12-06T23:27:00.220-06:002013-12-06T23:27:00.220-06:00David, I think it would be more edifying to put %c...David, I think it would be more edifying to put %change of net financial assets held by the non-banking sector on the vertical axis. <br /><br />What drives increases in nominal spending is a marginal increase in the exchange of financial assets for goods and services. Money is just the intermediary instrument used to effect this exchange. Once you understand this, then it's easy to Dan Thomashttps://www.blogger.com/profile/01354902389242286031noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-63469375539125806482013-12-06T18:13:55.719-06:002013-12-06T18:13:55.719-06:00Many proponents of NGDP such as Scott Sumner prefe...Many proponents of NGDP such as Scott Sumner prefer a NGDP per capita target or a nominal wage target. A NGDP target is a compromise. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-63927804500327081712013-12-06T17:37:31.701-06:002013-12-06T17:37:31.701-06:00Proponents of NGDP targeting have never been able ...Proponents of NGDP targeting have never been able to explain what happens if the median nominal wage fails to increase. It's very possible that all the benefits of an increase in the NGDP will accrue to the top 20% of households in the US, which will result in more inequality than we have today.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-33683123161132003882013-12-06T14:30:07.684-06:002013-12-06T14:30:07.684-06:00"increase financial intermediation, spur more..."increase financial intermediation, spur more investment spending, and ultimately catalyze a robust recovery in aggregate demand."<br /><br />Can you speak more to the knock-on effects of portfolio rebalancing to the real world beyond elevated asset prices? And why a more permanent view of monetary assets would have a more pronounced effect than the current state?<br /><br />Asset Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-5384722801765530002013-12-06T09:12:20.795-06:002013-12-06T09:12:20.795-06:00I have a question and a comment.
The question: W...I have a question and a comment.<br /><br />The question: Why does a commitment to steady NGDP growth also imply a commitment that the monetary base will be permanently higher ? Surely that depsend upon future demand to hold money ? If a future economic recovery leads to a lowering of this then will not the monetary base be redcuced by a NGDP-targeting regime to avoid an over-shoot.<br /><br Rob Rawlingsnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-26405375353695490812013-12-06T08:58:43.762-06:002013-12-06T08:58:43.762-06:00May I suggest that it was the RBA and its expected...May I suggest that it was the RBA and its expected path for monetary policy that allowed those cheques to matter?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-57764326165517420562013-12-06T07:37:24.276-06:002013-12-06T07:37:24.276-06:00Early on in the financial crisis, Australia posted...Early on in the financial crisis, Australia posted $A900 cheques to every taxpayer earning less than $100K and a further $950 for each school age child. May I suggest a review of evidence as how it impacted the Australian economy may be a useful investment of time?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-31258264025846984662013-12-06T07:14:56.653-06:002013-12-06T07:14:56.653-06:00Excellent blogging. Currently, under law, the Fed ...Excellent blogging. Currently, under law, the Fed can hold bonds to maturity, but then must extinguish the cash received at maturity (or when they sell bonds). So that is not a permanent monetary expansion. The Fed can, of course, roll-over on the debt. They would have to tell the market that is their plan, and then buy debt to replace the debt that has matured. <br /><br />I am surprised there Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com