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Monetary & Housing Policy Thread: Fed Adopts Evans Rule

TuffaloDeac10

TuffaloDeac10

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First, a quiz (I scored a 100%, look at me): http://www.federalreserveeducation.org/about-the-fed/structure-and-functions/monetary-policy/quiz/

Second, MOTHERFUCK Ben Bernanke and the FMOC for doing NOTHING today. The statutory dual mandate is in fact a dual mandate and BB is totally ignoring half of it, while missing the NOT ASYMMETRIC 2% inflation target that it considers to best reflect the price stability part of the mandate. It is described as a target, not a ceiling. Goddamn. I can't believe that the Chairman of the inert Fed authored this. BOOOOOOOOOOOOOOOOOOOOO


I think Bernanke's trying to get Willard elected.
 
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The whole idea of the dual mandate is ridiculous and politically driven. Monetary policy as a means of boosting aggregate demand is useful only in breaking a deflationary spiral. It does nothing for boosting long term growth. Thankfully, the FOMC realizes this and hasn't taken any measures to further distort their balance sheet. Any gains from an additional round of quantitative easing or yield curve manipulation will provide minimal illusory gains at best. Fiscal reform is what is needed to get the economy moving again.
 
I agree that Operation Twist is worthless, but disagree with the rest of your post. Fiscal expansion would be nice, though.
 
TuffaloDeac10 said:
I agree that Operation Twist is worthless, but disagree with the rest of your post. Fiscal expansion would be nice, though.
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What advantages would we gain from another round of quantitative easing? And would these advantages outweigh the costs of further expanding the Fed's absurd balance sheet?
 
Here's a good explanation for you: http://blog.supplysideliberal.com/post/24118420584/balance-sheet-monetary-policy-a-primer

And remember, we're below natural output:
fredgraph.png
 
TuffaloDeac10 said:
Here's a good explanation for you: http://blog.supplysideliberal.com/post/24118420584/balance-sheet-monetary-policy-a-primer

And remember, we're below natural output:
fredgraph.png
Click to expand...

That guy is quite the hardcore Keynesian. Unfortunately, if theory were to be believed, the economy should be roaring right now because of two rounds of trillion dollar asset buying programs and near-zero nominal interest rates. Not to mention the stimulus. It isn't because there is too much debt in the system right now, and no matter how many mortgage-backed securities the Fed buys, the housing market will not improve significantly until the subprimes begin maturing at a faster rate.

He makes the point that you should only worry about backlash inflation if you don't trust the Fed to hike interest rates to compensate. I most certainly do not trust the Fed to do that. Pure Keynesian theory is obnoxious. It oversimplifies the economy, aggregating diverse sectors that respond differently to policy initiatives into single variables like "aggregate demand", as if all it takes to achieve a stable economy is pulling one of two or three levers. We saw the results of this oversimplification in the '70s. The best way to handle the economy is to minimize government intrusion, and aim for stability of the variables you can control. Too much tampering inevitably leads to imbalance.
 
TR1982 said:
That guy is quite the hardcore Keynesian. Unfortunately, if theory were to be believed, the economy should be roaring right now because of two rounds of trillion dollar asset buying programs and near-zero nominal interest rates. Not to mention the stimulus. It isn't because there is too much debt in the system right now, and no matter how many mortgage-backed securities the Fed buys, the housing market will not improve significantly until the subprimes begin maturing at a faster rate.

He makes the point that you should only worry about backlash inflation if you don't trust the Fed to hike interest rates to compensate. I most certainly do not trust the Fed to do that. Pure Keynesian theory is obnoxious. It oversimplifies the economy, aggregating diverse sectors that respond differently to policy initiatives into single variables like "aggregate demand", as if all it takes to achieve a stable economy is pulling one of two or three levers. We saw the results of this oversimplification in the '70s. The best way to handle the economy is to minimize government intrusion, and aim for stability of the variables you can control. Too much tampering inevitably leads to imbalance.
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"Too much debt" needs an explanation. Because investors can't seem to get enough of Treasury debt.

Markley's mortgage plan seems like it would provide real relief to underwater homeowners at no cost to the Treasury, but there's no way FHFA or the House will go for it. The GOP, Bernanke included, is putting the party over the country right now.

And lol at saying Keynesian economics oversimplify anything while holding a laissez-faire view. Keynes is the GOAT
 
Too much for whom? If "too much debt" is the problem, then a jubilee would seem to be the solution. We could just wantonly destroy assets and cancel debt and then your problem would have disappeared.
 
TuffaloDeac10 said:
"Too much debt" needs an explanation. Because investors can't seem to get enough of Treasury debt.

Markley's mortgage plan seems like it would provide real relief to underwater homeowners at no cost to the Treasury, but there's no way FHFA or the House will go for it. The GOP, Bernanke included, is putting the party over the country right now.

And lol at saying Keynesian economics oversimplify anything while holding a laissez-faire view. Keynes is the GOAT
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Too much personal debt. Not government debt. Although that doesn't help either. Holding a laissez-faire view isn't oversimplifying the economy. It's in fact the acceptance of the fact that economy is too complex to centrally manage.
 
TuffaloDeac10 said:
Too much for whom? If "too much debt" is the problem, then a jubilee would seem to be the solution. We could just wantonly destroy assets and cancel debt and then your problem would have disappeared.
Click to expand...

No, it wouldn't. The only solution to the debt problem is to let the mortgages mature. You seem to have skimmed over that part in my post.
 
TR1982 said:
No, it wouldn't. The only solution to the debt problem is to let the mortgages mature. You seem to have skimmed over that part in my post.
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No it's not. Merkley's plan would help a lot with debt overhangs that are constraining the budgets of underwater households. You seem to have skimmed over that part in my post.



That seems much preferable to just letting people suffer with 100%+ LTV mortgages and high interest rates.
 
HARDCORE KEYNESIANS ARE EVERYWHERE

BLITZER: He's talking about a $750 billion economic stimulus package. He wants it to be passed as soon as possible. It's unclear if whether it can be passed before he's inaugurated on January 20th. What do you think about this proposal?

Mitt Romney
: Well, I frankly wish that the last Congress would have dealt with the stimulus issue and that the president could assign that before leaving office. I think there is need for economic stimulus. Americans have lost about $11 trillion in net worth. That translates into about $400 billion a year less spending that they'll be doing, and that's net of additional government programs like Medicaid and unemployment insurance. And government can help make that up in a very difficult time. And that's one of the reasons why I think a stimulus program is needed.

I'd move quickly. These are unusual times. But it has to be something which relieves pressure on middle-income families. I think a tax cut is necessary for them as well as for businesses that are growing. We'll be investing in infrastructure and in energy technologies. But let's not make this a Christmas tree of all of the favors for various politicians who have helped out the Obama campaign, giving them special projects.

That would be wrong. You'll see Republicans fight that tooth and nail if that happens. Let's do what's right for the economy, and let's not do what's a political expedient move.
 
TR1982 said:
That guy is quite the hardcore Keynesian[SUP]1[/SUP]. Unfortunately, if theory were to be believed, the economy should be roaring right now because of two rounds of trillion dollar asset buying programs and near-zero nominal interest rates. Not to mention the stimulus[SUP]2[/SUP]. It isn't because there is too much debt in the system right now, and no matter how many mortgage-backed securities the Fed buys, the housing market will not improve significantly until the subprimes begin maturing at a faster rate.

He makes the point that you should only worry about backlash inflation if you don't trust the Fed to hike interest rates to compensate. I most certainly do not trust the Fed to do that[SUP]3[/SUP]. Pure Keynesian theory is obnoxious[SUP]4[/SUP]. It oversimplifies the economy, aggregating diverse sectors that respond differently to policy initiatives into single variables like "aggregate demand", as if all it takes to achieve a stable economy is pulling one of two or three levers. We saw the results of this oversimplification in the '70s. The best way to handle the economy is to minimize government intrusion, and aim for stability of the variables you can control. Too much tampering inevitably leads to imbalance.
Click to expand...

1 What is that supposed to prove?

2 I think you've developed a rather poor understanding of Keynesian theory. The state of the economy today would be a function of both the size of the crash and then also of the expansionary measures. The recession was pretty damn steep.

3 That's very subjective. Why do you think the Fed is incompetent at fighting inflation? If anything, the evidence suggests their incompetence biases them towards hawkish actions and not dovish ones.

4 It is not.

What's doing a better job explaining the slump right now than IS-LM?
 
TuffaloDeac10 said:
1 What is that supposed to prove?

Nothing. I was just stating it.

2 I think you've developed a rather poor understanding of Keynesian theory. The state of the economy today would be a function of both the size of the crash and then also of the expansionary measures. The recession was pretty damn steep.

That's only if you accept Keynesian theory from the outset. Also, if basic Keynesian theory were correct, given the size of the expansionary measures taken, the recovery should have been much sharper, regardless of the severity of the recession.

3 That's very subjective. Why do you think the Fed is incompetent at fighting inflation? If anything, the evidence suggests their incompetence biases them towards hawkish actions and not dovish ones.

Of course it's subjective. I think the Fed is incompetent at fighting inflation because they have a long history of being incompetent. The only real inflation hawk was Volcker, and I don't need to remind you that his tenure was followed by 25 years of stable prices and high growth rates. Everyone else in modern history has either been a dove (Greenspan, Bernanke, Miller) or has given into political pressure to ease policy (Burns, Mac). Of course, the only reason Volcker was successful in fighting inflation was because Reagan let him, which is rare for a president. Most presidents will appoint chairmen that they think will keep monetary policy easy, so as to make reelection more likely. That's why I don't trust the Fed to raise rates. Because it is not a mechanical institution, it's an institution run by people, who are just as susceptible to politics and bias as Congress is.

4 It is not.

It is so.

What's doing a better job explaining the slump right now than IS-LM?

Nothing, really, but then again I kind of have a problem with economy-wide models. They are pedagogically useful, but their explanatory powers are weak, and they often make for horrible policy prescriptions. It's easy to say, "Ah! Aggregate demand has fallen, we must shift the LM curve to the right in order to make up for output. But grouping the entire loanable funds market together and failing to understand the nuanced outcomes that can occur when you rapidly expand the money supply leads to unintended consequences. See: Phillips Curve
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Also, how do you do those footnotes? That's way better than responding in the quotes.
 
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