tag:blogger.com,1999:blog-5713178645208582139.post619634710402951235..comments2024-03-17T03:26:42.785-05:00Comments on Macro Musings Blog: Is the U.S. Treasury Department Undermining QE2?David Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-5713178645208582139.post-9079370842287326722011-02-19T12:15:59.617-06:002011-02-19T12:15:59.617-06:00Some random comments:
"Currently, short-term...Some random comments:<br /><br />"Currently, short-term Treasury debt like T-bills are near-perfect substitutes for bank reserves . . . ." Then shouldn't T-bills (that bear zero interest) be treated as part of the money supply, for the purpose of economic analysis? And (it would seem) treasury securities that have slightly longer maturities or that bear slightly higher interest Philohttps://www.blogger.com/profile/02814125172453918700noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-72826559252100709052011-02-18T22:21:34.802-06:002011-02-18T22:21:34.802-06:00No it's not what Cochrane had in mind. I think...No it's not what Cochrane had in mind. I think he is saying that he just doesn't see the point of quantitative easing. I was using him to make a point that we have such massive problems now that it is folly to waste our time getting sucked into debates about a minor tweak. Tragically, so polarized is the US political system now that we cannot get anything important done. Thus do great ecbnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-84298964053344257142011-02-18T17:44:54.435-06:002011-02-18T17:44:54.435-06:00Prof. Beckworth, I have some questions about the o...Prof. Beckworth, I have some questions about the operationalization of QE2. Since nominal new money will have to be dispersed into the broader economy via an increase in bank reserves, all this additional money is expected to lead to additional lending to be effective in stimulating the economy. Do we have enough borrowers? Bank capital? This is the longer explanation of why I’m asking<br />http:Rogue Economisthttps://www.blogger.com/profile/03439817966760459091noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-61043315289642658402011-02-18T08:51:24.867-06:002011-02-18T08:51:24.867-06:00ECB, okay you are pointing to bigger, trend declin...ECB, okay you are pointing to bigger, trend decline. I agree with you to an extent on that point. But is that what Cochrane had in mind?David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-81743959881835304342011-02-18T07:57:21.218-06:002011-02-18T07:57:21.218-06:00DB: Well as we know, the stagnation started with t...DB: Well as we know, the stagnation started with the dotcom crash in 2000. A bubble in housing that was aided by lax monetary policy disguised the growing structural problems. As Minsky pointed out 40 years ago, the balance sheet structure of the economy gradually becomes ever more fragile, and eventually becomes susceptible to even a small shock, such as the Fed raising interest rates. Once the ecbnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-56715227304651676082011-02-18T01:25:24.037-06:002011-02-18T01:25:24.037-06:00David,
I agree that QE2 raised inflation expectat...David,<br /><br />I agree that QE2 raised inflation expectations. It is quite possible that market expectations of higher commodities and import prices contributed to that turnaround. Consider also that Case-Shiller house prices have fallen since August, and that shelter is 40% of core CPI. Therefore, it is natural that any change in overall CPI expectations would be concentrated in the David Pearsonnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-67450922874293637472011-02-17T21:24:28.433-06:002011-02-17T21:24:28.433-06:00JoeMac:
Allan Meltzer has an excellent article on...JoeMac:<br /><br />Allan Meltzer has an excellent article on the monetarist transmission channel that can be found here: http://www.jstor.org/pss/2138390<br /><br />Unfortunately, this is a gated article so you will need find a library that has access to it or purchase it.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-88205225997361533972011-02-17T21:22:11.856-06:002011-02-17T21:22:11.856-06:00Okay David, how do you then explain the turnaround...Okay David, how do you then explain the turnaround in inflation expectations?David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-80314087285080020092011-02-17T21:21:27.813-06:002011-02-17T21:21:27.813-06:00ECB:
I don't deny there are real problems. Bu...ECB:<br /><br />I don't deny there are real problems. But to dismiss the sluggish growth entirely on structural issues throws the baby out with the bathwater. <br /><br />Regarding Cochrane's comment, surely IOR is playing some role in the banks sitting on a trillion dollars of cash. Even the Fed believes that point. <br /><br />Also, if this were all about real, structural problems then David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-12706105309380387012011-02-17T20:30:54.741-06:002011-02-17T20:30:54.741-06:00David,
Do you know of a source that can carefully...David,<br /><br />Do you know of a source that can carefully explain the monetarist transmission process, the portfolio adjustment theory. I've tried everything to understand it and just can't figure it out? Perhaps you've had some posts on it?<br /><br />Thanks,<br /><br />JoeJoeMachttps://www.blogger.com/profile/12650518988624821388noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-56654658481599371052011-02-17T20:25:39.920-06:002011-02-17T20:25:39.920-06:00David,
I understand how QE-induced portfolio re-b...David,<br /><br />I understand how QE-induced portfolio re-balancing might have real effects through the wealth effect channel. However, there are forces that act against this dynamic. First, investors may choose to reduce their longest-duration bond positions in the face of inflation uncertainty. This would steepen the curve and increase the cost of capital for long-term projects (the 2yr to David Pearsonnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-62432242656954984522011-02-17T11:45:35.877-06:002011-02-17T11:45:35.877-06:00I presume the Cochrane quote comes from--
http://f...I presume the Cochrane quote comes from--<br />http://faculty.chicagobooth.edu/john.cochrane/research/papers/QEII.htmlRichard A.https://www.blogger.com/profile/02266854778511339492noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-31563135142341682602011-02-17T11:16:40.447-06:002011-02-17T11:16:40.447-06:00John Cochrane, U.Chicago:
"Unemployment is no...John Cochrane, U.Chicago:<br />"Unemployment is not high because the maturity structure of government debt is too long, thank you, nor from any lack of “liquidity” in a banking system that is sitting on a trillion dollars of cash. It’s time to focus on the real, microeconomic, tax, and regulatory barriers to growth, not a policy that creates a lot of noise but no real effect."ecbnoreply@blogger.com