tag:blogger.com,1999:blog-5713178645208582139.post1164882164559716013..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: Revisiting the Causes of the Great RecessionDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger60125tag:blogger.com,1999:blog-5713178645208582139.post-21849143496131195562016-02-05T10:20:25.916-06:002016-02-05T10:20:25.916-06:00The Arthurian: Those are excellent questions, and ...The Arthurian: Those are excellent questions, and the Market Monetarists think it is a national tragedy that the Fed doesn't create and subsidize an NGDP futures market, given how significant it is for monetary policy. So at best we can infer reasonable guesses.<br /><br />One obvious place to look, is actual published inflation and NGDP. That's not quite future expectations, but if youDon Geddishttps://www.blogger.com/profile/04214642122689048677noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-92220140435879111762016-02-05T04:16:51.932-06:002016-02-05T04:16:51.932-06:00Thanks Don, pretty interesting.
But are there nu...Thanks Don, pretty interesting. <br /><br />But are there numbers for NGDP expectations that I can look at on a graph? Or for inflation expectations -- maybe FRED's MICH? And are there numbers for the 'natural rate of interest'? Got links to anybody who has actually looked at such numbers?<br /><br />Numbers, as opposed to words, you know?<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-39152553834001836272016-02-04T13:34:01.441-06:002016-02-04T13:34:01.441-06:00The Arthurian: Yes, that's essentially correct...The Arthurian: Yes, that's essentially correct. Changes in the monetary base are indeed the tool that the central bank uses, in order to reach its interest rate target. But the "size of the monetary base" is a consequence of both the interest rate target, and also the current demand for money. So, yes, if all you have is the size of the monetary base, and you don't have any Don Geddishttps://www.blogger.com/profile/04214642122689048677noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-91597573573968907942016-02-04T10:40:07.296-06:002016-02-04T10:40:07.296-06:00Don: "the size of the monetary base is not a ...Don: "the size of the monetary base is not a reliable indicator of the stance of monetary policy... You need to track something like inflation (expectations) or NGDP (expectations) in order to determine whether money is tight or loose ..."<br /><br />David Beckworth writes about interest rates:<br />"beginning around April 2008 the Fed began signalling it was planning to raise The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-79285180839676477142016-02-04T09:53:33.709-06:002016-02-04T09:53:33.709-06:00The Arthurian: the size of the monetary base is no...The Arthurian: the size of the monetary base is not a reliable indicator of the stance of monetary policy. Friedman had proposed a k-percent rule in the 1960's. It was unsuccessful, because velocity is not as stable as Friedman hoped. As in any market, whether an item (in this case, money) is "tight" or "loose" depends as much on demand, as it does on supply. You need Don Geddishttps://www.blogger.com/profile/04214642122689048677noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-17968015524016086752016-02-04T03:07:27.880-06:002016-02-04T03:07:27.880-06:00Durations and Standards of "Tightness"
...Durations and Standards of "Tightness"<br /><br />http://newarthurianeconomics.blogspot.com/2016/02/durations-and-standards-of-tightness.html<br />The Arthurianhttps://www.blogger.com/profile/16501331051089400601noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-38872941402533608752016-02-03T23:17:17.954-06:002016-02-03T23:17:17.954-06:00Tin: No, sorry, you're not correct. The Treas...Tin: No, sorry, you're not correct. The Treasury does print physical currency, but only in exchange for deposits. No fiscal/Treasury action changes the size of the monetary base. Only Fed actions affect the monetary base size. The phrase "printing of fiat money" does not refer to the physical creation of currency; it refers to enlarging the monetary base. Only the Fed does thatDon Geddishttps://www.blogger.com/profile/04214642122689048677noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-44410452610625526182016-02-03T22:26:37.863-06:002016-02-03T22:26:37.863-06:00Don, The "printing of fiat money" is a f...Don, The "printing of fiat money" is a fiscal/Treasury function, not the Fed's. The Fed makes loans available to member banks (and pays interest on deposits from them) at arbitrary rates. They also been known to purchase assets under extraordinary circumstances (i.e. QE) and presumably liquidate them (although they've indicated their preference to hold the bonds acquired under Tinhttp://notinkansasanymoredot.blogspot.com/noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-84758780399597694262016-02-03T07:58:46.817-06:002016-02-03T07:58:46.817-06:00Hey David would love to get your view on this prop...Hey David would love to get your view on this proposal of mine...I think I might have discovered a way to prevent regulatory capture of a regulator.The idea is simple. Start with the assumption that regulatory capture will happen and nothing you do will prevent it from happening.Then you divide the regulator into three independent wings, like the Legislative, Executive and Judiciary. Have three Anonymoushttps://www.blogger.com/profile/11826933622252621374noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-65850975873174882372016-02-03T07:57:41.729-06:002016-02-03T07:57:41.729-06:00Hey David would love to get your view on this prop...Hey David would love to get your view on this proposal of mine...I think I might have discovered a way to prevent regulatory capture of a regulator.The idea is simple. Start with the assumption that regulatory capture will happen and nothing you do will prevent it from happening.Then you divide the regulator into three independent wings, like the Legislative, Executive and Judiciary. Have three Anonymoushttps://www.blogger.com/profile/11826933622252621374noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-76714273405578444882016-02-02T11:58:44.595-06:002016-02-02T11:58:44.595-06:00Hi David,
Yes I agree there are various possible ...Hi David,<br /><br />Yes I agree there are various possible meanings to the statement. But here's what I mean: Suppose in June 2007 the 24-month fed futures contract predicts 3.5%. Then a year passes, and by June 2008 the 12-month futures contract is still at 3.5%.<br /><br />Yes, you can say "In mid-2008 the market predicted a tightening of Fed policy over the coming year," but Bob Murphyhttps://www.blogger.com/profile/04001108408649311528noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-49835303173754053042016-01-31T13:31:11.173-06:002016-01-31T13:31:11.173-06:00I re-read Rowe's post (I can't believe it&...I re-read Rowe's post (I can't believe it's been over 4 years since he wrote that). As a methodological device, I never liked the "concrete steppes" criticism. It always just seemed like hand waiving to me. But Rowe's post is so good because he does describe the mechanism (the steppes) by which expectations can work. But now I have a question. <br /><br />Assuming Jarednoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-35077598554437075162016-01-31T00:05:36.653-06:002016-01-31T00:05:36.653-06:00Phillip, it's almost as if you didn't read...Phillip, it's almost as if you didn't read the post or the accompanying article published in the NYT. The point is that the Fed can sustain NGDP despite very real trouble in asset markets. And doing so will substantially limit lost net worth, as well as future income, and thereby mitigate the negative outcomes that you point out (i.e., increased demand for money).<br /><br />Also, "Anonymoushttps://www.blogger.com/profile/09445489809839987633noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-74603037444537643442016-01-30T18:43:00.165-06:002016-01-30T18:43:00.165-06:00Jared: Here's another way to think about it. ...Jared: Here's another way to think about it. The Fed claims to be targeting 2% annual inflation, but in the last decade has frequently fallen short of its goal. If you really think the Fed could monetize the entire $18T national debt, and still fail to raise inflation to 2% ... well, then forget about monetary policy. That's just a free lunch. You would be claiming that the country Don Geddishttps://www.blogger.com/profile/04214642122689048677noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-46682701806717394162016-01-30T17:38:30.187-06:002016-01-30T17:38:30.187-06:00Jared, yes the overall soft constraints included c...Jared, yes the overall soft constraints included confused but powerful non-economists in politics, and in fact the consensus of the overall macroeconomic profession (as suggested by the open letter you linked to). All these people were wrong, and the Fed in fact had sufficient power to prevent the recession, but chose not to use it. You should think of the NYT op-ed that is the subject of this Don Geddishttps://www.blogger.com/profile/04214642122689048677noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-64167628585635408492016-01-30T16:06:20.985-06:002016-01-30T16:06:20.985-06:00Ah, here's a good list of those other names I ...Ah, here's a good list of those other names I alluded to above, not even including Rick Perry. Again, I find it really hard to blame Bernanke and the Fed for not doing enough in a context such as this*. <br /><br />http://economics21.org/commentary/e21s-open-letter-ben-bernanke<br /><br />*This letter was written in 2010, but I think it's fairly safe to assume Bernanke would have faced Anonymoushttps://www.blogger.com/profile/00865345082316718702noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-82790505929135060512016-01-30T15:46:24.536-06:002016-01-30T15:46:24.536-06:00Don, yes! I think we have found common ground. I ...Don, yes! I think we have found common ground. I agree the obstacles are political, not economic, but I think we still have some differences, albeit some may be more semantic than substantive. In response to your 1), which also serves as an answer to your question to Tin, the only way an NGDPLT can be credible, is if the central bank has the authority to purchase a wide array of assets. Anonymoushttps://www.blogger.com/profile/00865345082316718702noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-65178797896715929752016-01-30T15:17:26.199-06:002016-01-30T15:17:26.199-06:00Well, it didn't happen this time in a vacuum, ...Well, it didn't happen this time in a vacuum, Tin. (Sorry for the metaphor!) People were walking away from homes and inventories were soaring. It was not a normal situation. You had to be a blind man to not see it by 2007. The Fed just doesn't care about the USA anymore. I believed that when I first started looking at the housing bubble and crash and I believe it more than ever. The Fed Gary Andersonhttp://www.talkmarkets.com/content/us-markets/libor-destroyed-subprime-but-the-fed-deepened-the-great-recession?post=82947&page=2noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-52825897401871369452016-01-30T11:50:13.183-06:002016-01-30T11:50:13.183-06:00Tin, it's clear that you and I disagree, but w...Tin, it's clear that you and I disagree, but who has the error is a little more ambiguous. You are trying to assert that a central bank with unlimited ability to print fiat currency, is somehow unable to debase the value of that currency? Do you have any evidence -- theoretical or empirical -- for what mysterious force would stop a fiat currency central bank from causing hyperinflation, if Don Geddishttps://www.blogger.com/profile/04214642122689048677noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-69001434775784815502016-01-30T10:41:10.453-06:002016-01-30T10:41:10.453-06:00Jared, wish I could edit and add this to the last ...Jared, wish I could edit and add this to the last post. Interbank lending bumped up for a time after it cratered due to excess reserve interest paid to the TBTF banks, and then just vanished. If you extend George Selgin's chart out to current time, interbank lending has gone away, so banks use excess reserves to settle and the Fed as well. So, that can't stimulate banks to lend much, IMO.Gary Andersonhttp://www.talkmarkets.com/content/financial/a-scary-monetary-conundrum-arises-from-the-great-recession?post=83841&uid=4798noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-83812804476144882402016-01-30T10:31:39.360-06:002016-01-30T10:31:39.360-06:00Less demand for loans unless the credit scores are...Less demand for loans unless the credit scores are lowered. When mortgages are cheap, high credit scores are often needed. When the rates go up a bit, banks lower their demands for pristine credit. So, it isn't always the rule that demand will soften when rates rise. Depends on the ease of qualification for the loan. Also, if the loan is adjustable, it needs to be able to adjust upward for itGary Andersonhttp://www.talkmarkets.com/content/financial/a-scary-monetary-conundrum-arises-from-the-great-recession?post=83841&uid=4798noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-90934965732771418782016-01-30T09:17:24.303-06:002016-01-30T09:17:24.303-06:00Don, I think you have a basic error in the belief ...Don, I think you have a basic error in the belief that "The Fed is ... a thermostat, connected to an infinitely powerful furnace and AC." The proper metaphor would have an infinitely powerful AC and a rather anemic space heater.Tinhttps://www.blogger.com/profile/17469298813605483869noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-35166626441636190672016-01-30T09:04:25.613-06:002016-01-30T09:04:25.613-06:00This would imply that every time in the preceding ...This would imply that every time in the preceding 60 years that happened, the Fed recognized the red flag, opened the floodgates in a timely fashion, and a Great Recession was averted. Am I missing something? Tinhttps://www.blogger.com/profile/17469298813605483869noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-51310757866706194562016-01-30T08:57:49.775-06:002016-01-30T08:57:49.775-06:00Both Fed'08 and Fed'16 share the same bias...Both Fed'08 and Fed'16 share the same bias but Fed'16 DOES seek a little inflation...desperately. In their saner moments, anyways.Tinhttps://www.blogger.com/profile/17469298813605483869noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-31629380767699647992016-01-29T16:37:20.133-06:002016-01-29T16:37:20.133-06:00I agree with you Jared! But notice that you'r...I agree with you Jared! But notice that you're describing political obstacles, not economic ones. Fisher and Lacker were in power! They had votes! What I'm looking for is: (1) acknowledge that GOOD monetary policy would and could have essentially eliminated the economic pain of the recession, and thus (2) correctly blame the Fed leadership in 2008 for making horrible decisions.<br /><Don Geddishttps://www.blogger.com/profile/04214642122689048677noreply@blogger.com