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Monetary & Housing Policy Thread: Fed Adopts Evans Rule

KillSwofford said:
Quantitative easing is robbery. How they get away with it is most people don't even know they're being robbed. They've been brainwashed to think that inflation is natural, inevitable, unavoidable.
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You know that goldsmiths charged fees for holding gold deposits, right? Inflation (the erosion of the purchasing power or money) IS natural, inevitable, and unavoidable. Nothing passes through time unscathed.

Not to mention that the gold standard era regularly had godawful price swings.
 
TuffaloDeac10 said:
It would more accurately be called "qualitative easing"
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Jeez. Someone get a shovel. It's getting deep in here.

Unfortunately, America is asleep. Not enough people understand or pay attention to what is happening to see how they're getting robbed.

Look at the change in inflation since the Fed came into existence vs. before it. Boy the cost of time has really gone up, there must be a supply shortage of it or something.
 
KillSwofford said:
Jeez. Someone get a shovel. It's getting deep in here.

Unfortunately, America is asleep. Not enough people understand or pay attention to what is happening to see how they're getting robbed.

Look at the change in inflation since the Fed came into existence vs. before it. Boy the cost of time has really gone up, there must be a supply shortage of it or something.
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It's supposed to be deep in here, a "Monetary & Housing Policy Thread" has to be full of wonkery. If it's too hot in the kitchen, get out, or politely ask for a clearer explanation of ideas. From Gresham's Law (and perusing YouTube comments), we can assume that bad discourse drives out good, so please don't howl at the night about Ben Bernanke "stealing" your money. That's just not the case. Creating more currency is a tried and true way of combating recessions and output gaps (see Capitol Hill baby-sitting co-op), and if savers are getting creamed, it's because everyone wants to save and nobody wants to borrow. The only way to not "hurt savers" is to have a strong economy and demand for credit, which is what Bernanke is trying to help create (he's also asked for more fiscal stimulus during his appearances on the Hill).

And here's a history of US price swings. I predict you won't find many people who want to sign up for wild price swings and the accompanying rashes of banking panics that characterized the pre-Fed era.

inflation-1.jpeg
 
TuffaloDeac10 said:
It's supposed to be deep in here, a "Monetary & Housing Policy Thread" has to be full of wonkery.
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Not the kind of deep I was talking about.

I thought you said inflation was inevitable? Now you say the Fed prevents wild price swings by creating inflation? Maybe I'm not quite up to the level of wonkery on the thread but how in the hell can both be true?

It looks like pre-Fed that sometimes there was inflation, and sometimes there was deflation...ups and downs...which makes sense and in the long run pretty much balances out -- net near zero, correct me if I'm wrong. Your "nothing escapes time unscathed" horsecrap is proven to be bunk by the very chart you posted. Part of the country was able to convert to an industrial economy in the 1800s despite there not being a Fed...how did that happen? I mean didn't the lack of inflation completely cripple the economy? No, it didn't. But maybe it's just too hot in the kitchen for me.

So what happened in the 20s and 30s -- Fed not have all the bugs out of its inflation machine yet? How was the Depression possible, I mean the Fed "currency creation" does such a great job combating recessions that the most crippling one in the country's history came after it was formed?

And it is exactly the case that inflation robs individuals of the value of their money, value they have earned. It is stealing, no less. And now it is fed policy that it will take place indefinitely and in yet-to-be-determined quantity. Basically, they're announce that they're going to destroy the value of the currency but they're not going to say how or when or how quickly. Are they even going to announce after the fact or is it just going to be a big surprise? Answer is neither...they're going to just hope no one notices, or more accurately, looks behind the curtain. Obviously people will notice their money buying less, but again, they've been brainwashed to think that it's natural and inevitable. It isn't, as your chart proves.

And apparently it does a pretty crappy job of combating recessions since we still have them and have been dealing with an economic malaise for what, a decade now? And if you correct for the bubbles that were clearly inventions (dot.con, real estate), really there hasn't been a healthy economy in the US since the mid 90s.

Have you ever stopped to think of what 3-10% inflation (what it looks like has been typical post WWII) looks like over time? And those numbers are massaged to take out the things that people need most and which just so happen to seem to go up in price faster.

Savers are getting creamed because corporate America doesn't make money from people not spending it. Inflation is designed to get people to spend...your money's not going to be worth as much in the future so you better do something with it now. It's an insidious way of force people to give over their money to the corporatists. Savers will get creamed as long as there's a Fed, because that's what the Fed is intended to do -- erode the value of money so as to make deficit spending more palatable, both for individuals and institutions. Since about 2/3 of the economy is consumer spending, it makes sense that on paper keeping people forking their cash over rather than being responsible would help the economy as far as the corporatists care. But you know what it doesn't help? It doesn't help the poor get richer because the wages they're working for are worth less. It doesn't help the small business owner because he's paying more for product, has to charge more to people that are making less and is getting killed by big businesses that take advantage of economies of scale to drive out competition and create a duopoly or thereabouts.

And with that, I have to go to work and earn some money that is worth less than it was yesterday, thanks to the Fed.
 
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Another good post, KS! Accumulated inflation before the Federal Reserve was about 0. Since 1913 it is what, 2000%? Bankers and government in cahoots with one another benefit each other by stealing the savings of people who worked hard to save a little bit. We would gladly go back to "price swings" if we could save something today and still have it be worth something tommorow.
 
KillSwofford said:
Not the kind of deep I was talking about.

I thought you said inflation was inevitable? Now you say the Fed prevents wild price swings by creating inflation? Maybe I'm not quite up to the level of wonkery on the thread but how in the hell can both be true?[SUP]1[/SUP]

It looks like pre-Fed that sometimes there was inflation, and sometimes there was deflation...ups and downs...which makes sense and in the long run pretty much balances out -- net near zero, correct me if I'm wrong. Your "nothing escapes time unscathed" horsecrap is proven to be bunk by the very chart you posted.[SUP]2[/SUP] Part of the country was able to convert to an industrial economy in the 1800s despite there not being a Fed...how did that happen?[SUP]3[/SUP] I mean didn't the lack of inflation completely cripple the economy? No, it didn't.[SUP]4[/SUP] But maybe it's just too hot in the kitchen for me.

So what happened in the 20s and 30s[SUP]5[/SUP] -- Fed not have all the bugs out of its inflation machine yet? How was the Depression possible, I mean the Fed "currency creation" does such a great job combating recessions that the most crippling one in the country's history came after it was formed?[SUP]6[/SUP]

And it is exactly the case that inflation robs individuals of the value of their money, value they have earned. It is stealing, no less. And now it is fed policy that it will take place indefinitely and in yet-to-be-determined quantity. Basically, they're announce that they're going to destroy the value of the currency but they're not going to say how or when or how quickly. Are they even going to announce after the fact or is it just going to be a big surprise? Answer is neither...they're going to just hope no one notices, or more accurately, looks behind the curtain.[SUP]7[/SUP] Obviously people will notice their money buying less, but again, they've been brainwashed to think that it's natural and inevitable. It isn't, as your chart proves.

And apparently it does a pretty crappy job of combating recessions since we still have them and have been dealing with an economic malaise for what, a decade now? And if you correct for the bubbles that were clearly inventions (dot.con, real estate), really there hasn't been a healthy economy in the US since the mid 90s.[SUP]8[/SUP]

Have you ever stopped to think of what 3-10% inflation (what it looks like has been typical post WWII) looks like over time? And those numbers are massaged to take out the things that people need most and which just so happen to seem to go up in price faster.

Savers are getting creamed because corporate America doesn't make money from people not spending it[SUP]9[/SUP]. Inflation is designed to get people to spend...your money's not going to be worth as much in the future so you better do something with it now. It's an insidious way of force people to give over their money to the corporatists. Savers will get creamed as long as there's a Fed, because that's what the Fed is intended to do -- erode the value of money so as to make deficit spending more palatable, both for individuals and institutions. Since about 2/3 of the economy is consumer spending, it makes sense that on paper keeping people forking their cash over rather than being responsible would help the economy as far as the corporatists care. But you know what it doesn't help? It doesn't help the poor get richer because the wages they're working for are worth less. It doesn't help the small business owner because he's paying more for product, has to charge more to people that are making less and is getting killed by big businesses that take advantage of economies of scale to drive out competition and create a duopoly or thereabouts.

And with that, I have to go to work and earn some money that is worth less than it was yesterday, thanks to the Fed.
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1. Managing is not the same as creating. It can easily be true because the ideas aren't contradictory.

2. People live, eat, buy things, and die in the short-run. Throughout the gold standard period, people would, in your parlance, wake up and "go to work and earn some money that is worth less than it was yesterday." That's as big an issue as steady long-run inflation, which can be taken into account in people's financial planning. And in between wild bouts of inflation, we'd get deflationary panics in which the suddenly huge real values of debts would crucify farmers on crosses of gold. We had major panics in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933 while under a gold standard. That's awful.

3. Because the pace of technological progress made up for terrible macroeconomic management in that time period. Flows of immigrants also helped.

4. Except the economy DID get crippled in 1873, 1884, 1890, 1893, 1907, and, of course, the Great Depression.

5. You do know that we were still on a gold standard in the 20s and 30s with the dollar fixed at $20.67 per troy ounce and that the Fed actually worked hard to maintain that parity, right? We didn't adjust the gold standard until 1934. How do you sit there, wrong, and use your own wrongness to attack other ideas? That's just galling. The US didn't get completely off of the gold standard until 1971. And we did that because it wasn't working well for us, not because Nixon was running some bankers cabal with a nefarious intent to steal your granny's savings or whatever it is that Austrians think.

6. It was possible because (drumroll) the money was being destroyed left and right after Black Tuesday.

7. This is some pretty grand hyperbole. The Fed doesn't actually create inflation when it creates a new dollar. It has created a lot (but not enough!) of new dollars since 2009, and CPI inflation and Billion Prices Project inflation have been really low in this time period, and shadowstats hasn't raised its subscription fee or stopped accepting dollars as payment, which one would think they'd do if inflation, especially hyperinflation was happening or about to happen. And the Bureau of Engraving and Printing offers tours.

8. It is a streeeeeeeeeeeetch to blame monetary policy, rather than neglectful regulatory agencies and perverse incentives for key market players, for either bubble.

9. The way for a business to earn money is by selling a product to customers for that money which the business hoped to earn in the first place. How exactly do you want businesses to make money without people spending it?
 
I should be clear, slightly higher-than-usual inflation (about 3%) right now would be a good thing, as it reduces the real value of our current debt overhang.
 
There's absolutely no way I'm going through and replying to each footnote with more footnotes, to be followed by more footnotes.

Crosses of gold, eh. Wonder where you got that from. The funny thing is I don't remember bringing up anything about the gold standard. But it's interesting that at the time, silver coins were generally worth more as money than they were as silver. Now, the opposite is true. But "free silver" would be preferable to what we have today, which is a currency that is backed by nothing and therefore bound by nothing with regard to its value or lack thereof. The other funny thing is that free silver was a populist notion. The Fed is anything but populist.

Several places you cite several events in one block and they span the time before and after the Fed was formed. So it appears the Fed had little or no effect in preventing what it was supposedly supposed to prevent. Panics before, panics after. Recessions and depressions before, recessions and depressions after. Only with the Fed, you get bonus inflation all day, every day!

Your speculation as to Nixon's motives is just that, and is only used to take a cheap shot at the Austrian school.

I do want to address your last two numbered points though.

"8. It is a streeeeeeeeeeeetch to blame monetary policy, rather than neglectful regulatory agencies and perverse incentives for key market players, for either bubble."

Explain this then.

"The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance.To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

Read more: http://articles.businessinsider.com...0530_1_housing-bubble-slump-fed#ixzz26rgFfcpW

Mighty curious that a man of significant influence among the Keynesians says that and then it happens.

"9. The way for a business to earn money is by selling a product to customers for that money which the business hoped to earn in the first place. How exactly do you want businesses to make money without people spending it?"

What are you even talking about? You act like no business ever survived before the Fed was formed. How did businesses survive? By producing something people wanted or needed, same as ever. Only then, people weren't constantly forced to make the choice of either keeping their money and watching it diminish in value consistently over their lifetimes, or spend it. Just because it happens more slowly doesn't mean its not happening. What happens in a country with hyperinflation...people spend their money as fast as they can get it while it's still worth something close to what it was when they got it. No point holding onto it. Same thing happens with the slow march of inflation under the Fed. As your chart shows, it wasn't always that way. What do you suppose would have been the antidote for deflation? Savings, or at least not being in debt.
 
I think he is saying good for our national debt, which in turn would be good for our country. Ability to lower our debt value without having to cut spending or raise taxes. (correct me if I am wrong Tuffalo. I am a self admitted novice).
 
Wrangor said:
I think he is saying good for our national debt, which in turn would be good for our country. Ability to lower our debt value without having to cut spending or raise taxes. (correct me if I am wrong Tuffalo. I am a self admitted novice).
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That's what I figured, and it's exactly as you say...without having to cut spending being the key part. Politicians and power players trying to have it both ways at the expense of regular folks.

It's not better for the majority of Americans.
 
Wrangor said:
I think he is saying good for our national debt, which in turn would be good for our country. Ability to lower our debt value without having to cut spending or raise taxes. (correct me if I am wrong Tuffalo. I am a self admitted novice).
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Personal debts, really (see exchange with TR around page 5). Much more concerned about personal debts than the publicly held federal debt right now.
 
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KillSwofford said:
Several places you cite several events in one block and they span the time before and after the Fed was formed. So it appears the Fed had little or no effect in preventing what it was supposedly supposed to prevent. Panics before, panics after. Recessions and depressions before, recessions and depressions after. Only with the Fed, you get bonus inflation all day, every day!
Click to expand...

The Fed managed the dollar under a gold standard until Nixon had Bretton-Woods taken out back behind the shed. The gold standard more or less tied the Fed's hands, or, in the case of the Great Depression, forced it to act in a way that made things worse in order to maintain the dollar's value. The FOMC only dates to 1933 and Banking Act of 1933 (Glass-Steagall). It's not accurate to talk as though the Fed has been the same institution with the same goals and means throughout its history.

The bubble owed its much of its existence to capital flows into the US that were seeking safe assets. Ratings agencies were staffed by idiots (people even dumber than Caturday) and could make more money by assigning things (specifically MBS) AAA ratings than by doing their jobs and assessing actual risk. Sure, it helped that money was sort of easy throughout much of the 00s, but the bubble owed a lot more to misbehavior and bubble psychology (market players didn't even think about home prices not continuing to rise).

What are you even talking about?
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This

Savers are getting creamed because corporate America doesn't make money from people not spending it
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There is no way I can think of for a business to make money that doesn't involve someone else spending money. I don't know where you came to the conclusion that I "act like no business ever survived before the Fed was formed" because I've never said anything like that.
 
TuffaloDeac10 said:
The Fed managed the dollar under a gold standard until Nixon had Bretton-Woods taken out back behind the shed. The gold standard more or less tied the Fed's hands, or, in the case of the Great Depression, forced it to act in a way that made things worse in order to maintain the dollar's value. The FOMC only dates to 1933 and Banking Act of 1933 (Glass-Steagall). It's not accurate to talk as though the Fed has been the same institution with the same goals and means throughout its history.

The bubble owed its much of its existence to capital flows into the US that were seeking safe assets. Ratings agencies were staffed by idiots (people even dumber than Caturday) and could make more money by assigning things (specifically MBS) AAA ratings than by doing their jobs and assessing actual risk. Sure, it helped that money was sort of easy throughout much of the 00s, but the bubble owed a lot more to misbehavior and bubble psychology (market players didn't even think about home prices not continuing to rise).



This



There is no way I can think of for a business to make money that doesn't involve someone else spending money. I don't know where you came to the conclusion that I "act like no business ever survived before the Fed was formed" because I've never said anything like that.
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Great post.
 
TuffaloDeac10 said:
There is no way I can think of for a business to make money that doesn't involve someone else spending money. I don't know where you came to the conclusion that I "act like no business ever survived before the Fed was formed" because I've never said anything like that.
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I didn't say you said it, I said you act like it.

I don't know what your point is saying that a business has to have people spend money to make money. Um...true? yes? Doesn't change that if the value of people's money is systematically whittled away over time, it creates disincentive to save and incentive to spend. Good for big business, bad for people that would like to spend responsibly for things they need, and save as well to provide a safety net for themselves. Ah but that's where the vast increase in the size of government comes in...you don't have have your own safety net, they'll make one for you! All you have to do is give up, yes, more of your money, power and freedoms.

You stumbled into my point yet again in another part of your post when you said "oh sure, easy money helped" but then tried to marginalize. It didn't help, it was the thing. It's exactly what Krugman called for and it's exactly what took place. The NASDAQ bubble -- aka not real growth -- burst and so a new ruse was needed to create the illusion of real growth. Krugman knew that. So what's the new bubble now?

Not really interested in market psychology because it only followed exactly what Krugman wanted.
 
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