tag:blogger.com,1999:blog-5713178645208582139.post8779215939982518138..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: FOMC Decides to Focus on the Rudder, Not the DestinationDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-5713178645208582139.post-25113862392224152742014-01-22T09:42:32.874-06:002014-01-22T09:42:32.874-06:00The metaphor is great. I'll extend it. The c...The metaphor is great. I'll extend it. The crew cares a lot about where the ship will end up, but the captain won't say. Instead they listen intently to every word she utters and watch every move she makes to improve their forecast of the ships destination. All of the crew members make decisions that influence the direction of the ship, but because nobody knows the destination, many PJGhttps://www.blogger.com/profile/16735742181830832193noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-20286824966117868852012-01-06T20:28:28.543-06:002012-01-06T20:28:28.543-06:00Given the importance of expected higher NGDP in ai...Given the importance of expected higher NGDP in aiding the recovery, I find it terrible that the Fed is focusing its communications strategy on the rudder and not the destination. (Good metaphor, by the way).Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-54721117346306169352012-01-06T12:50:43.324-06:002012-01-06T12:50:43.324-06:00It is time Market Monetarists define the debate.
...It is time Market Monetarists define the debate.<br /><br />What the Fed and other monetarists are practicing is "theo-monetarism." <br /><br />Theo-monetarism, as practiced, is resulting in recessionary deflations in Europe and the USA, and a Japan-like economy. <br /><br />Japan has an extremely strong yen. Japan has had 15 percent deflation in the last 20 years. Japan's Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-63119025983838855072012-01-05T10:17:54.705-06:002012-01-05T10:17:54.705-06:00David Pearson has a good point. I would note also...David Pearson has a good point. I would note also that the Fed forecasts real growth, so one could, if one were so inclined, interpret its set of forecasts as a nominal GDP target. The problem, though, is that, if it is to be interpreted as a target, it is probably more like a growth rate target than a level target: the Fed will almost certainly not systematically revise its future growth and Andy Harlesshttps://www.blogger.com/profile/17582263872850949568noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-67560696537528064692012-01-05T09:04:33.684-06:002012-01-05T09:04:33.684-06:00Integral,
Good point. In terms of my analogy, the...Integral,<br /><br />Good point. In terms of my analogy, the captain has always been looking at the rudder but now is focused even more and making projections about when he will eventually turn it. And yes, it seems the Fed would want to say something about the IOR in terms of future monetary policy.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-29033964210360904152012-01-05T09:02:46.126-06:002012-01-05T09:02:46.126-06:00Anonymous,
It does add some clarity about what th...Anonymous,<br /><br />It does add some clarity about what the FOMC is thinking, so yes that is nice. It just seems the Fed is trying so hard with all these different unconventional monetary experiments--QE1, <br />QE2, Operation Twist, long-run ffr forecast--with limited success. One would hope that eventually the importance of an explicit target would be become clear.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-10294833307007031262012-01-04T21:59:07.648-06:002012-01-04T21:59:07.648-06:00I am concerned that the new Fed effort will merely...I am concerned that the new Fed effort will merely strengthen the "monetary policy is interest rate policy" view, to the detriment of the "monetary policy is AD policy" that market monetarists are (correctly!) so intent on pushing.<br /><br />And as Lars states, the Fed apparently isn't going to publish conditional forecasts for its two most important policy tools: the Integralnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-48439976066573279102012-01-04T17:27:31.238-06:002012-01-04T17:27:31.238-06:00But isn't more transparency better than none? ...But isn't more transparency better than none? I mean, surely, it is not the first best outcome, but I like this better than more discrete actions, especially if they would make a QE forecast aswell.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-36041530547827608912012-01-04T13:39:07.713-06:002012-01-04T13:39:07.713-06:00"FOMC Decides to Focus on the Rudder, Not the..."FOMC Decides to Focus on the Rudder, Not the Destination"<br /><br />That is the best headlines maybe ever written---congrats to Beckworth. <br /><br />This should become one of the mantras of the our criticism of the Fed.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-15758622423798965172012-01-04T13:02:08.045-06:002012-01-04T13:02:08.045-06:00David Pearson,
I hope you are right and that it w...David Pearson,<br /><br />I hope you are right and that it works according to plan, but the convoluted nature of it makes me skeptical.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-90465508622302070072012-01-04T12:59:55.865-06:002012-01-04T12:59:55.865-06:00Lars,
I suspect the new policy reflects the polit...Lars,<br /><br />I suspect the new policy reflects the political realities the Fed faces, rather than ineptness.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-71890373775934884802012-01-04T12:29:45.222-06:002012-01-04T12:29:45.222-06:00BTW, the above regime would have a "Chuck Nor...BTW, the above regime would have a "Chuck Norris" aspect. If the $2tr QE forecast manages to raise the TIPS spread to 4%, the Fed need not actually purchase $2tr in assets.David Pearsonnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-90285158164434588772012-01-04T12:27:12.867-06:002012-01-04T12:27:12.867-06:00I think the inflation forecast will act as a back-...I think the inflation forecast will act as a back-door NGDP target. There are lots of kinks in the plan, but it could morph into an expectations-setting regime. <br /><br />Let's say the Fed wants NGDP of 6% and thinks GDP will be 2%. It publishes a forecast of 4% inflation as a result of the expected path of policy: ZIRP through 2014. Assume TIPS spreads remain at 2% despite the forecast. David Pearsonnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-27131354409711995772012-01-04T11:24:04.430-06:002012-01-04T11:24:04.430-06:00I continue to find it somewhat odd (to say the lea...I continue to find it somewhat odd (to say the least) that the Fed can announce a target for one of its policy instruments but at the same time refuse to state what it actually it targeting. Its like giving the directions on a map with out telling where you want to go...bizarre.<br /><br />And why not give a path for QE? With interests close to zero the main policy tool is QE so why not tell how Lars Christensenhttps://www.blogger.com/profile/08409946182659964026noreply@blogger.com