tag:blogger.com,1999:blog-5713178645208582139.post7629213937845848293..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: My Reply to Paul KrugmanDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-5713178645208582139.post-30182385972724812362011-05-15T23:30:18.088-05:002011-05-15T23:30:18.088-05:00All:
In case you missed it, fellow quasi monetari...All:<br /><br />In case you missed it, fellow quasi monetarist Bill Woolsey, I mean Mayor Bill Woolsey, has <a href="http://monetaryfreedom-billwoolsey.blogspot.com/2011/05/beckworth-and-krugman-on-quasi.html" rel="nofollow">replied</a> to my exchange with Krugman.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-40475299319535077952011-05-15T23:27:44.794-05:002011-05-15T23:27:44.794-05:00JKH:
If I understand your second question, the an...JKH:<br /><br />If I understand your second question, the answer for how to set the policy path is for the Fed to clearly and aggressively communicate to the public that it is going to hit some nominal level target no matter the costs. The expectation of such actions by itself would cause the market to do most of the heavy lifting. <br /><br />FDR, for example, with his fireside chats and other David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-23149625245169598832011-05-15T23:11:58.414-05:002011-05-15T23:11:58.414-05:00Matt:
One other thing. If unconventional monetary...Matt:<br /><br />One other thing. If unconventional monetary policy really is so hard then why was FDR's unconventional monetary policy so darn effective in 1933-1936 as I show in this <a href="http://macromarketmusings.blogspot.com/2010/10/qe-has-worked-before-my-reply-to-paul.html" rel="nofollow">post</a>? (See <a href="http://macromarketmusings.blogspot.com/2008/11/David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-66595945858449725302011-05-15T23:02:18.287-05:002011-05-15T23:02:18.287-05:00Matt:
Your concern about the zero lower bound cau...Matt:<br /><br />Your concern about the zero lower bound causing the Fed to become just another producer of safe assets in a far bigger market dominated by the Treasury, GSEs, and banks is only an issue from the store of value perspective of money. Yes, from this perspective investors are indifferent. And from this perspective Steve Williamson's claim that QE2 really isn't all that David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-84355138024094680912011-05-15T17:17:36.601-05:002011-05-15T17:17:36.601-05:00I just say the Fed needs to flood so much money in...I just say the Fed needs to flood so much money into the system we start to have growth, then inflation. <br /><br />That makes sense to me, given we are dancing around deflation, and the GDP is depressed and spare capacity is everywhere. <br /><br />I will leave it to the academics to put fancy pants explanations on it.<br /><br />For me, just print money until the plates melt.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-62540008064396363162011-05-15T15:06:16.449-05:002011-05-15T15:06:16.449-05:00This comment has been removed by the author.Matt Rognliehttps://www.blogger.com/profile/10631887981976481195noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-82459559068957440222011-05-15T13:17:23.068-05:002011-05-15T13:17:23.068-05:00Money is never just another safe and liquid asset,...Money is never just another safe and liquid asset, because unlike those assets money is the medium of exchange. Disequilibria for safe and liquid assets instigate price and quantity adjustments in their respective markets. But money does not have a price of its own, and its quantity does not rise or fall when people wish to change their aggregate holdings. Just because an asset is a close Lee Kellynoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-40889231353535093772011-05-15T12:05:12.954-05:002011-05-15T12:05:12.954-05:00Just to be clear, I completely agree with Scott th...Just to be clear, I completely agree with Scott that QE2 worked primarily through the "signaling channel"; shaping expectations about the future trajectory of the policy rate can be a very powerful tool indeed, as I think all sides of this discussion (both David and Paul Krugman) acknowledge. <br /><br />I just think that conducting monetary policy without somehow affecting the policy Matt Rognliehttps://www.blogger.com/profile/10631887981976481195noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-40374074420059196182011-05-15T12:04:59.106-05:002011-05-15T12:04:59.106-05:00Krugman is just using you to score points against ...Krugman is just using you to score points against Republicans; he is being characteristically insincere.<br /><br />His accusation that you advocate technocratic policy action, and his suggestion that you "blithely" dismiss liquidity traps, belie his veiled contempt. You have consistently explained why you believe monetary policy can be effective when some interest rates approach zero, Lee Kellynoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-64104936081057356942011-05-15T11:36:40.402-05:002011-05-15T11:36:40.402-05:00JKH,
Just an addenda to what Scott said about Japa...JKH,<br />Just an addenda to what Scott said about Japan:<br /><br />1) During 1993-2002 RGDP growth averaged 0.9%, unemployment rose almost consistently every year from 2.2% in 1992 to 5.4% in 2002. CPI fell from 2.5% in 1992 to -0.7%in 2002.<br />2) The Japanese announced their plan of ryōteki kin’yū kanwa (QE) on March 19, 2001 and maintained it through March 9, 2006.<br />3) RGDP growth Mark A. Sadowskihttps://www.blogger.com/profile/08259309059705236763noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-30387433352032403842011-05-15T10:52:56.194-05:002011-05-15T10:52:56.194-05:00I would add that the NGDP targeting should be LEVE...I would add that the NGDP targeting should be LEVEL targeting. If you do that then there will be no liquidity traps.<br /><br />I partly agree with Matt and partly disagree. Buying longer term bonds doesn't, by itself, address the objections raised by Eggertsson/Woodford/Krugman. Indeed if the expectations hypothesis holds, the expected return on long bonds (held over the next 12 months) Scott Sumnerhttps://www.blogger.com/profile/15864819372390187247noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-91737362732341201662011-05-15T07:31:29.066-05:002011-05-15T07:31:29.066-05:00From the “artifact” post you reference:
“Just let...From the “artifact” post you reference:<br /><br />“Just let that time path for the nominal magnitude grow over time at a fast enough rate and the equilibrium overnight rate will rise above zero. If monetary policy were framed as the central bank setting some nominal variable, expectations of monetary policy could then coalesce around that variable, monetary policy would be loosened, and the JKHhttps://www.blogger.com/profile/10275975730082410689noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-19585939242409600042011-05-15T07:05:22.353-05:002011-05-15T07:05:22.353-05:00From Krugman's post on Friedman:
"So, af...From Krugman's post on Friedman:<br /><br />"So, after 2000 the Bank of Japan engineered a huge increase in the monetary base; this was the original quantitative easing. And it didn’t even translate into a surge in the money supply! This is why I’m so skeptical of people who say that all the Fed has to do is target higher nominal GDP growth — in liquidity trap conditions, the Fed doesn’tJKHhttps://www.blogger.com/profile/10275975730082410689noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-2807309552979378662011-05-15T01:36:32.177-05:002011-05-15T01:36:32.177-05:00A big difference, though, is that where Krugman an...<i>A big difference, though, is that where Krugman and others see the move from t-bills to other assets as a discrete jump from conventional to unconventional monetary policy, quasi-monetarists see it as simply moving down the list of assets that can affect money demand. The 0% bond for us really is not a big deal, but simply an artifact of monetary policy using a short-term interest rate as theMatt Rognliehttps://www.blogger.com/profile/10631887981976481195noreply@blogger.com