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Old 09-13-2011, 11:34 AM   #61
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Proof in economics doesn't exist.
Really? I think lots of laws of economic theories have been proven over the years. I suppose the law of supply and demand is made up?


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I can direct you to research, but that won't suffice. Conflicting research also exists. But if you're predicting 10% treasury rates (as you did above) and if you've been making those predictions for a long while (as you have) - you may want to reconsider the underlying premise that led you to make those predictions in view of the fact that those predictions have failed for nearly three years running.
I can't ever remember a time when a Fed chairman made a blanket statement saying the Fed would not raise rates for two years. He can play all the games he wants with keeping inflation at bay. The huge rise in commodities like oil, gold, silver, etc, along with huge increases in corn and other food sources is an indicator that inflation is occuring at some level. I would rather see a small tightening of credit now than a massive whipsaw of inflation in a couple years. But hey, even if your grocery bill is up 40% from last year, and gas is $4 a gallon, its a great time to refinance your house!!
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Old 09-13-2011, 12:47 PM   #62
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I can't ever remember a time when a Fed chairman made a blanket statement saying the Fed would not raise rates for two years.
These are not usual times, and unless you're more than eighty years old, I don't think your memory is going to include any meaningful parallel.

But also, let's not overstate what the Fed actually said:

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The Committee currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.
"Are likely to warrant" isn't exactly a pledge. It is a condition dependent observation.

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I would rather see a small tightening of credit now than a massive whipsaw of inflation in a couple years.
Would you have not said the same thing a couple of years ago? Would that have been the correct policy decision based on what we now know? What makes us more confident today that there will be a "massive whipsaw of inflation in a couple of years?" Isn't a resumption of a deflationary deleveraging cycle also a risk?

Consider the scenario where unemployment is 9.1%, job growth has fallen to zero, GDP growth has decelerated to 1% from 2.3% two quarters ago and from 3.8% two quarters before that, and 10-yr market inflation expectations have fallen from 2.5% to 1.9%. Looking at that data, do you tighten credit? If so, what measures are you using to justify that policy move?
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Old 09-13-2011, 02:54 PM   #63
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How timely to our discussion of monetary policy in the current environment.

By way of (conservative) economist Tyler Cowen, I just now happened upon this paper discussing the causes of the 1937 recession. The author blames monetary tightening, and concludes thus:

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The recession of 1937-38 occurred long ago, but it does have policy lessons for today. It suggests that, in a weak recovery, a pre-emptive monetary strike against inflation (which was very low at the time, as it is today) is capable of producing a devastating recession.
Something to consider when worrying about inflation that hasn't yet made its presence felt.
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Old 09-13-2011, 02:58 PM   #64
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But also, let's not overstate what the Fed actually said:



"Are likely to warrant" isn't exactly a pledge. It is a condition dependent observation.
You're the credit expert, so let's say we print another $2 trillion and throw it at the economy, is that going to correct our fundamental problems?

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Would you have not said the same thing a couple of years ago? Would that have been the correct policy decision based on what we now know? What makes us more confident today that there will be a "massive whipsaw of inflation in a couple of years?" Isn't a resumption of a deflationary deleveraging cycle also a risk?
Because you have to pay the piper sometime?

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Consider the scenario where unemployment is 9.1%, job growth has fallen to zero, GDP growth has decelerated to 1% from 2.3% two quarters ago and from 3.8% two quarters before that, and 10-yr market inflation expectations have fallen from 2.5% to 1.9%. Looking at that data, do you tighten credit? If so, what measures are you using to justify that policy move?
Do you really think 25 or 50 bp increase in the fed funds rate is going to derail everything? Also, the statistics you mention above are current, and that is AFTER all the stimulus dollars we pumped in. So, in effect, those numbers show that the stimulus had a small short-term effect but little to no long-term result. We also have the highest poverty rate since the great Depression. Another strike against the Keynesian believers........
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Old 09-13-2011, 03:00 PM   #65
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How timely to our discussion of monetary policy in the current environment.

By way of (conservative) economist Tyler Cowen, I just now happened upon this paper discussing the causes of the 1937 recession. The author blames monetary tightening, and concludes thus:

Something to consider when worrying about inflation that hasn't yet made its presence felt.
Well you youself said:
Quote:
These are not usual times.
Ergo, monetary policy today is not as it was in the 1930's. So, let the Fed print money and throws 6 more QEs at the problem, yup, that should fix things.........
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Old 09-13-2011, 03:25 PM   #66
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rather than make predictions about what will happen- which we won't know because tomorrow never seems to come- I would like some explanations for stuff that already happened explained please

The claim by the anti- Keynes crowd saying government spending "never works, never has" have to explain to me how the Great Depression ended.

also please explain why Japan is wallowing economically now for 20 years.
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Old 09-13-2011, 03:31 PM   #67
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How timely to our discussion of monetary policy in the current environment.

By way of (conservative) economist Tyler Cowen, I just now happened upon this paper discussing the causes of the 1937 recession. The author blames monetary tightening, and concludes thus:



Something to consider when worrying about inflation that hasn't yet made its presence felt.

Gone4Good... I like reading your posts on this.... not that I agree with you, but yours are informed posts with information that increases my knowledge of the subject, not a knee jerk liberal stand....

Now, this is from memory and about economics that I had in college... so if I am wrong... so be it...

But I remember the prof talking about the debt of a country etc. and how they would get into trouble (this was not talking about the US in particular)... but his comment went something like... 'a country can continue to borrow money at low rates until it can't'... IOW, the switch between being able to borrow and not being able to borrow occured pretty quickly and the result was high to hyper inflation as the country 'fixed' the problem...


I don't think that spending money on the infrastructure projects etc. will do much in the short or long term to get people employed.... most are more capital cost and not labor costs....

And the fed gvmt paying for local teachers, police and firefighters is just plain wrong IMO... if the local people can not continue to employe these people, why should we pay for them

I would much rather see a targeted tax credit for hiring the long term unemployed... this is still 'spending' IMO and it requires actually hiring someone.... the negative is that the people who are short time unemployed or the people who are just looking to change jobs get hurt this way...

Just as an FYI.... I think there are a number of jobs out there that are just not filled because of lack of skills... our company of 25 people have had 5 people leave to another job and we have hired a total of 7 people this year (two starting in two weeks)... Our biggest problem was finding QUALIFIED people... who could pass a background check....
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Old 09-13-2011, 03:36 PM   #68
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rather than make predictions about what will happen- which we won't know because tomorrow never seems to come- I would like some explanations for stuff that already happened explained please

The claim by the anti- Keynes crowd saying government spending "never works, never has" have to explain to me how the Great Depression ended.

also please explain why Japan is wallowing economically now for 20 years.

The answer to your first question if pretty easy (yet, some will argue)... but it was WWII that fixed the problem...

The answer to your second.... not sure... I do not think they have addressed their banking problems... IOW, I had read that a lot of the debt on the books would have been written off in our country 20 years ago... and this causes a ripple effect... it does not make sense to me because their rate is zero, so if there were money to be made it would have happened....

I will wait to see what other answers are presented...
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Old 09-13-2011, 03:45 PM   #69
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The claim by the anti- Keynes crowd saying government spending "never works, never has" have to explain to me how the Great Depression ended.
WW2.

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also please explain why Japan is wallowing economically now for 20 years.
Have you looked at how much money the Japanese have thrown at everything during the last 20 years? At their interst rates? At their gvernment debt levels?

Too bad they couldn't have started a war.

Ha
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Old 09-13-2011, 04:29 PM   #70
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And the fed gvmt paying for local teachers, police and firefighters is just plain wrong IMO... if the local people can not continue to employe these people, why should we pay for them
I want to see solutions for our economic problems that work, and I don't feel I need to be concerned with your peculiar ideas of right and wrong. Why should we pay for them? If it fixes our economy, isn't that reason enough?
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Old 09-13-2011, 04:49 PM   #71
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I want to see solutions for our economic problems that work, and I don't feel I need to be concerned with your peculiar ideas of right and wrong. Why should we pay for them? If it fixes our economy, isn't that reason enough?

How does it fix our economy Paying for a job that will not be there in a year or two after the fed money goes away is kicking the can down the road... what we need is jobs that will be in there after the fed money is gone... and not coming back for more.... if the locals can not pay for their gvmt jobs, it should not be a job...



Edit to add... If just paying for people to work would fix the problem, then let's hire a bunch of people to dig holes and another bunch of people to fill them in the next day... lots of work, but nothing that can be sustained without gvmt help...
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Old 09-13-2011, 04:57 PM   #72
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How is any job sustained for years?
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Old 09-13-2011, 05:03 PM   #73
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How is any job sustained for years?

They are productive...


Which means people are willing to pay for their output.... because they can sell that output for more then it cost them...


Decided to add.... back when I worked for a mega.... the HR dept had determined that any job that was created with a permanent employee lasted 50 years... so we would hire temps if we did not think the job was sustainable....
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Old 09-13-2011, 06:03 PM   #74
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Edit to add... If just paying for people to work would fix the problem, then let's hire a bunch of people to dig holes and another bunch of people to fill them in the next day... lots of work, but nothing that can be sustained without gvmt help...
Okay, let's pay people to dig holes and others to fill them in. If it promises to work to move our economy in a good direction, why not do it? What do you have against it? And why should I care? I think you're letting ideology get in the way of finding working solutions.
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Old 09-13-2011, 06:38 PM   #75
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Gone4Good... I like reading your posts on this.... not that I agree with you, but yours are informed posts with information that increases my knowledge of the subject, not a knee jerk liberal stand....

Thank you. High praise, especially someone not inclined to see my point of view.

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a country can continue to borrow money at low rates until it can't'... IOW, the switch between being able to borrow and not being able to borrow occurred pretty quickly and the result was high to hyper inflation as the country 'fixed' the problem...

It’s certainly true that markets can go from euphoria to panic in the blink of an eye – we’ve seen it in practice. It's also true that countries who issue debt in their own currencies have some special advantages that make them less susceptible to these kinds of panics. Having said that, credible entitlement and tax reforms can go a long way to solidifying confidence in our long-term fiscal solvency. This stuff can be done without creating a near-term fiscal drag and should be put on the front burner.

Another point worth considering is that the single biggest contributor to our current deficits isn’t anything people primarily talk about (stimulus, Bush tax cuts, wars, etc); it is recession and sub-par growth. A full-employment policy is a deficit reduction policy.
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Old 09-13-2011, 07:04 PM   #76
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WW2.



Ha
How did WW2 cure the depresssion? By what mechanism?
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Old 09-13-2011, 07:10 PM   #77
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That's the thing the Europeans don't seem to get, as they impose austerity programs on the PIIGS and then they see Greece have something like a -7.8% GDP the last quarter (hope I read that correctly) and they fall even further into debt.

Meanwhile, Switzerland has been very good with their fiscal situation, so much that their currency appreciates a lot against her neighbors' currencies and the result is that the economy is being hurt because tourism from neighboring countries is way down.
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Old 09-13-2011, 07:40 PM   #78
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That's the thing the Europeans don't seem to get, as they impose austerity programs on the PIIGS and then they see Greece have something like a -7.8% GDP the last quarter (hope I read that correctly) and they fall even further into debt.

Meanwhile, Switzerland has been very good with their fiscal situation, so much that their currency appreciates a lot against her neighbors' currencies and the result is that the economy is being hurt because tourism from neighboring countries is way down.
Switzerland is one of those silly countries that is willing to run a slight government surplus to save for (or pay off deficits from) the Bad Years. This is different from a simple balanced budget requirement, as it requires some planning and cooperation between various political factions.
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Old 09-13-2011, 07:58 PM   #79
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How did WW2 cure the depresssion? By what mechanism?
Well, it is hard for me to believe that this is a serious question. But in case it is, here is one for you- have you ever heard of a country in an all-encompassing war that did not experience full employment and usually inflation, or at least an end to deflation?

Me neither.
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Old 09-13-2011, 08:40 PM   #80
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Well, it is hard for me to believe that this is a serious question. But in case it is, here is one for you- ...
In case it's a serious question, why not just answer it?
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