tag:blogger.com,1999:blog-5713178645208582139.post6004918684693608249..comments2024-03-17T03:26:42.785-05:00Comments on Macro Musings Blog: Can Raising Interest Rates Spark a Robust Recovery?David Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-5713178645208582139.post-38907171266378971912012-02-14T16:43:26.271-06:002012-02-14T16:43:26.271-06:00"Now imagine some negative shock increases de..."Now imagine some negative shock increases desired saving and lowers desired investment."<br /><br />Now imagine a positive shock doing that.<br /><br />"What is interesting here is that the Fed cannot lower its policy rate below 0%, yet it needs to in order to close the output gap and restore full employment. But it cannot because of the 0% bound on nominal interest rates."<Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-69507612443679406002012-02-10T03:13:07.025-06:002012-02-10T03:13:07.025-06:00Mr Beckworth - could you do a post showing how nom...Mr Beckworth - could you do a post showing how nominal GDP targeting goes through in the IS-LM model? Some of us oldsters reared on 1970s style macro would find this quite helpful.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-15572391896322573482012-02-09T15:03:03.725-06:002012-02-09T15:03:03.725-06:00The Fed tried that in 1931 and it didn't work....The Fed tried that in 1931 and it didn't work. <br /><br />There is simply to much debt out there. Raising rates would make it impossible to service.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-26008884349827469032012-02-09T01:15:57.895-06:002012-02-09T01:15:57.895-06:00Here in Turkey there is a fixation on interest rat...Here in Turkey there is a fixation on interest rates, particularly among politicians, that is kind of disturbing. The current PM wants a zero (real?) interest rate policy in order to discourage the rentier class which he sees as fostering unproductive behavior("unearned income" in IRS parlance). The current deputy chairman of the dominant political party has accused "interest rate Justin D. Tapphttps://www.blogger.com/profile/12618278252714742391noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-53817530740305142152012-02-08T19:57:52.356-06:002012-02-08T19:57:52.356-06:00David,
I'm not going to comment really on you...David,<br /><br />I'm not going to comment really on your argument (which is of course sound), but I think you're jumping to conclusions by saying that Gross has reversed causality. Read his FT piece carefully, does he ever say the Fed should raise rates? It's all musings about the zero bound for interest rates, but it makes no policy suggestions. <br /><br />The solution of course isCthormnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-23416524437430062312012-02-08T18:33:01.884-06:002012-02-08T18:33:01.884-06:00To the extent that any sovereign debt is treated a...To the extent that any sovereign debt is treated as bank capital, the effect would be lower than natural interest rates, not higher. IE, absent sovereign debt (new money), banks would have to attract existing money.Nick Ahttp://www.nickade.com/blognoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-63207597962106240592012-02-07T22:06:23.755-06:002012-02-07T22:06:23.755-06:00This inchoate excretion by an otherwise intelligen...This inchoate excretion by an otherwise intelligent and friendly Bill Gross has certainly gotten a lot of attention.<br /><br />Gross seems to almost get it---the economy needs moderate inflation, he almost says it. Both now, and permanently. <br /><br />For a while the fed should print money and monetize debt like there's no tomorrow. QE. Get some inflation and growth going.<br /><br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-28828698024692247102012-02-07T19:23:56.519-06:002012-02-07T19:23:56.519-06:00David,
Gross's editorial was confusing in many...David,<br />Gross's editorial was confusing in many respects. However, I think somewhere in there (and perhaps his other writings) is a valid point. It has to do not with equilibrium rates, but with the intensity of financial intermediation. Gross implies that much intermediation is made possible by the incentive for maturity transformation. The most important incentive (for banks and Diego Espinosanoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-48707161626904023482012-02-07T18:40:51.168-06:002012-02-07T18:40:51.168-06:00Great post.
An analogy..
Suppose the demand for ...Great post.<br /><br />An analogy..<br /><br />Suppose the demand for the typical good falls. (Aggregate demand falls.)<br /><br />Prices fall. Because of low prices, firms want to produce left.<br /><br />Clearly, the answer is to have government reverse the cut throat competition and force prices back up, right?<br /><br />Of course, in reality, quantity demanded would fall and production Bill Woolseyhttps://www.blogger.com/profile/06330232724290161369noreply@blogger.com