tag:blogger.com,1999:blog-5713178645208582139.post2083792641966634813..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: Monetary Policy Change James Hamilton Can Believe InDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger24125tag:blogger.com,1999:blog-5713178645208582139.post-10991571846039149352012-05-11T10:30:21.102-05:002012-05-11T10:30:21.102-05:00Dave Rosenberg recently had this to say about nega...Dave Rosenberg recently had this to say about negative interest rates. Sounds wrong to me but I can’t exactly explain why…..<br /><br />http://www.zerohedge.com/news/gold-%E2%80%98will-go-3000-dollars-ounce%E2%80%99-rosenberg<br /><br />Rosenberg says that it is not about being “bullish or bearish,” it is about “stating how you view the world” and he warns that the major central banks are all Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-71859731156333191382012-05-09T12:29:15.913-05:002012-05-09T12:29:15.913-05:00dwb,
Yes, that's it. If the proposal was to ...dwb,<br /><br />Yes, that's it. If the proposal was to introduce NGDP targeting from present NGDP at 4%, I could live with it. I suspect that that would be hard to maintain during the next boom though!<br /><br />Now you mention it, I do recall Scott Sumner saying something like a third of the way back to the pre-crisis trend - my bad. The pace at which the central bank is required to get RebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-22273229049842133322012-05-09T11:29:03.237-05:002012-05-09T11:29:03.237-05:00@RebelEconomist
ok so your issue is not with ngdp...@RebelEconomist<br /><br />ok so your issue is not with ngdp targeting per se, but how much of the output gap to close. <br /><br />Last I checked, Sumner only advocated going 1/3 of the way back to trend.<br /><br />I don't think its a hidden agenda. If I got 17 economists in a room I'd get 51 different opinions on how much of the output gap in the US is structural vs. how much is dwbhttps://www.blogger.com/profile/02799793864068767226noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-26774906844494741362012-05-09T09:59:55.668-05:002012-05-09T09:59:55.668-05:00dwb, you really are not getting this! Did I say t...dwb, you really are not getting this! Did I say that NGDP targeting implies higher LONG RUN inflation? No. It is the SHORT RUN inflation implications of introducing NGDP targeting that bother me.<br /><br />Assuming that NGDP targeting aims to get NGDP onto a 5% trend starting from its pre-crisis level as Scott Sumner would favour, what I think it will do, as I think most of its advocates RebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-52690375159719831222012-05-09T09:10:13.381-05:002012-05-09T09:10:13.381-05:00@RebelEconomist,
can you show me any evidence of (...@RebelEconomist,<br />can you show me any evidence of (0) that ngdp targeting will imply higher long-run trend inflation (in fact I am persuaded its the opposite), or is this just a general fear? I'd love to see actual evidence of this.dwbhttps://www.blogger.com/profile/02799793864068767226noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-7987967282800518142012-05-09T04:57:23.758-05:002012-05-09T04:57:23.758-05:00dwb, you clearly do not understand my point. Econ...dwb, you clearly do not understand my point. Economics is largely built from motivation-based arguments; you can't just "leave [them] at the door"! What I say is that economics should not judge motivation, but take it, and its influence on likely behaviour, into account.<br /><br />You are however, spot on with points 0 to 2.RebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-84868100328919481452012-05-08T19:07:09.959-05:002012-05-08T19:07:09.959-05:00@RebelEconomist,
"excuse me, did I mention mo...@RebelEconomist,<br />"excuse me, did I mention morality or class conflict"<br /><br />yes, you said:<br /><br />"There are many people, especially in the current account deficit countries like the US and Britain, who would be pleased to have the real burden of their debt reduced now that it is time to repay it."<br /><br />and <br /><br />"It is only rational for debtorsdwbhttps://www.blogger.com/profile/02799793864068767226noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-58285367969634019682012-05-08T17:52:13.991-05:002012-05-08T17:52:13.991-05:00dwb, excuse me, did I mention morality or class co...dwb, excuse me, did I mention morality or class conflict?<br /><br />I have come to realise that when the inflationistas like Martin Wolf, Paul Krugman etc start using loaded words like "moralistic", "fetish", "rentier", "peevish" (Benjamin!) etc, it is because they know that the argument they oppose makes sense, but they dislike its motivation.RebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-41255969015267849772012-05-08T14:46:07.324-05:002012-05-08T14:46:07.324-05:00@RebelEconomist
Please spare me the morality and c...@RebelEconomist<br />Please spare me the morality and class warfare arguments.<br /><br />There is nothing going on here but bare knuckled, empirical, quantitative economics.<br /><br />For example, when Jan Hatzius (Chief economist of Goldman Sachs) endorsed NGDP targeting I dont think its was out of some charitable motivation towards debt holders. I've never known those Fleet street people dwbhttps://www.blogger.com/profile/02799793864068767226noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-29733634737113459162012-05-08T14:22:27.366-05:002012-05-08T14:22:27.366-05:00Sorry RB, but government can tax inflation right o...Sorry RB, but government can tax inflation right out of the system if they so choose. If inflation is surging, so is incomes somewhere........so? You get the picture, even now. Anybody with a controllable currency can facilitate the necessary steps in rebalanceing. It is who will take the loss. For "inflationistas" it is the rentier. For the deflationista, it is the labererAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-21194206696254661272012-05-08T12:21:40.933-05:002012-05-08T12:21:40.933-05:00"Putting ngdp back to trend merely means that..."Putting ngdp back to trend merely means that people can repay debts they contracted for at full employment"<br /><br />Wrong, dwb. People contract to repay in nominal terms regardless of the conditions that prevail when repayment is due, and the price (interest rate) is negotiated on that basis. And the present level of unemployment is hardly unprecedented in the context of, say, a RebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-67974893319298383952012-05-08T09:56:07.202-05:002012-05-08T09:56:07.202-05:00But the transition from one regime to another pres...<i> But the transition from one regime to another presents a particularly large backsliding opportunity. </i><br /><br />I doubt that: historically an institution like the Fed is peevishly focused on credibility (thats its largest asset).<br /><br />So whatever target they pick, I feel very confident they will go out of their way to defend it.<br /><br />People in the UK seem to feel that the BoEdwbnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-65961835088717944392012-05-08T09:38:18.399-05:002012-05-08T09:38:18.399-05:00@RebelEconomist,
burden of their debt reduced no...@RebelEconomist,<br /><br /><i> burden of their debt reduced now that it is time to repay it </i><br /><br />we've had this discussion many times, its just Austrian nonsense. <br /><br />unemployment causes mortgage delinquencies, and unemployment is well above normal still. <br /><br />You cannot compare the UK and US. the UK has some supply side issues that it needs to work out. No monetarydwbnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-64773242302798499992012-05-08T09:35:03.588-05:002012-05-08T09:35:03.588-05:00You are right of course, dwb. All monetary policy...You are right of course, dwb. All monetary policy regimes are vulnerable to backsliding. But the transition from one regime to another presents a particularly large backsliding opportunity. Which is why, to ensure that NGDP targeting is introduced for the right reasons, I would like to see advocates of NGDP targeting suggesting a target growth rate of, say, 4% or less, starting from the presentRebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-53411729438776287992012-05-08T09:13:58.756-05:002012-05-08T09:13:58.756-05:00I know, Bill; I first encountered the NGDP targeti...I know, Bill; I first encountered the NGDP targeting idea as argued by Samuel Brittan in the FT many years ago.<br /><br />It is the present that concerns me, however. There are many people, especially in the current account deficit countries like the US and Britain, who would be pleased to have the real burden of their debt reduced now that it is time to repay it. And many in the financialisedRebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-36320705885126295332012-05-08T07:43:05.676-05:002012-05-08T07:43:05.676-05:00@RevelEconomist,
"but I suspect that, when t...@RevelEconomist,<br /><br />"but I suspect that, when the time came, the authorities would find this politically difficult."<br /><br />political will can be lost at any time, under any circumstances, even under the current regime- There is nothing special or unique about ngdp targeting. It might even be instigated by continually supressing the economy below potential. those voters are dwbnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-77648748197899075102012-05-08T06:39:26.625-05:002012-05-08T06:39:26.625-05:00David:
Of course, I agree that an explicit nomina...David:<br /><br />Of course, I agree that an explicit nominal GDP target is a substitute for quantitative easing with no specific goal. <br /><br />Rebel Economists:<br /><br />Dupes? Market monetarists have favored nominal GDP targets for 20 years. <br /><br />An explicit target for nominal GDP reduces the amount of quantitive easing needed. I don't think that reducing the quantity Bill Woolseyhttps://www.blogger.com/profile/06330232724290161369noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-60792380170656165402012-05-08T05:15:12.161-05:002012-05-08T05:15:12.161-05:00I agree with Bill: you cannot assume that the Fed ...I agree with Bill: you cannot assume that the Fed could hold down the interest rate on its massive reserves liability - unless you are not serious about monetary stability that is. This is why people like Krugman are wrong to dismiss the inflationary threat of QE on the grounds that there is no inflation now - the test comes when it is time to withdraw QE.<br /><br />Similarly, you assume that RebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-58465476458382308822012-05-07T20:09:07.486-05:002012-05-07T20:09:07.486-05:00Or it would be easier (and less controversial) if ...Or it would be easier (and less controversial) if the Fed just stopped paying interest on excess reserves held by the banks.Ed Rhttps://www.blogger.com/profile/17720176132423294274noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-27763025973837090552012-05-07T19:03:41.574-05:002012-05-07T19:03:41.574-05:00dwb, I am working on Andolfatto...dwb, I am working on Andolfatto...David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-52980305894694355172012-05-07T19:03:17.478-05:002012-05-07T19:03:17.478-05:00Bill:
Yes, from a consolidated government balance...Bill:<br /><br />Yes, from a consolidated government balance sheet view of the Fed and Treasury there could still be a problem. But it seems highly unlikely that the Fed doing a NGDP level target like the one I outline above would trigger a crisis so severe that the Fed would end up broke and the Treasury incapable of bailing it out. For something that catastrophic it would require some kind of David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-4362394264874385222012-05-07T18:41:10.298-05:002012-05-07T18:41:10.298-05:00... and Andolfatto, Bullard and 15 other FOMC memb...... and Andolfatto, Bullard and 15 other FOMC members....<br /><br />hopefully i will beat Benjamin Cole: excellent, excellent blogging.dwbnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-87046744158291936852012-05-07T18:40:54.361-05:002012-05-07T18:40:54.361-05:00... and Andolfatto, Bullard and 15 other FOMC memb...... and Andolfatto, Bullard and 15 other FOMC members....<br /><br />hopefully i will beat Benjamin Cole: excellent, excellent blogging.dwbnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-16591226883831153562012-05-07T17:42:37.003-05:002012-05-07T17:42:37.003-05:00David:
I agree with your analysis, of course.
St...David:<br /><br />I agree with your analysis, of course.<br /><br />Still, the financial crisis scenario is that people believe that the Federal government cannot or will not pay. While it is true that the Fed can always government debt at a high price, under this scenario, this creates high inflation expectations, nominal expenditure rises violently, and there is massive inflation. And so, Bill Woolseyhttps://www.blogger.com/profile/06330232724290161369noreply@blogger.com