tag:blogger.com,1999:blog-6276561747841568697.post1990670394272981..comments2024-03-27T05:23:48.855-04:00Comments on Krugman-in-Wonderland: Is the Fed Hampering the Recovery?William L. Andersonhttp://www.blogger.com/profile/01802990642236807359noreply@blogger.comBlogger27125tag:blogger.com,1999:blog-6276561747841568697.post-86869302381209794112013-02-03T17:48:55.987-05:002013-02-03T17:48:55.987-05:00"Second, the Fed's policies discourage sa..."Second, the Fed's policies discourage savings (which makes Keynesians very happy, given their vaunted "multiplier" is 1 over the savings rate, so the less we save, the greater the "multiplier"), as real savings provide the liquid capital for long-term investments."<br /><br /> Actually the interest rate is low because there is a high quantity of funds available for capital investments.<br /><br />As Krugman did cover in the article<br /> Krugman- <br /> " The Fed is driving down interest rates, or equivalently driving up the price of bonds, by buying bonds; I can’t think of any kind of economic analysis in which that would reduce the quantity of bonds sellers end up issuing, that is, the amount of borrowing (and lending) in the economy."Dineronoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-38750942850513406722013-02-03T11:10:01.602-05:002013-02-03T11:10:01.602-05:00Joe I concur. Ultimately the market is bigger tha...Joe I concur. Ultimately the market is bigger than government. They can keep things suppressed longer than the rational mind would think possible but you can't hold the beach ball under water forever. Mikenoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-68639211046791013842013-02-02T20:46:01.071-05:002013-02-02T20:46:01.071-05:00Mike, I don't doubt that they'll try to ke...Mike, I don't doubt that they'll try to keep rates suppressed, I just don't know that they'll be able to. Also, they are now having the problem that some sectors of the economy are starting to really heat up again (mainly housing and construction). That puts them in quite a difficult position. <br /><br />Trust me, I know what kind of damage a rise in rates can do to the fiscal situation. Even an uptick of 100 basis points will be very problematic. But keep in mind that they cannot fully control what the rate of interest is, they can only influence it (albeit very heavily). Ultimately, the market will decide. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-12714591896684146152013-02-02T10:25:06.952-05:002013-02-02T10:25:06.952-05:00Not a conspiracy. Its part of the policy objective...<i>Not a conspiracy. Its part of the policy objective</i><br /><br />That is the big mystery. Do Keynesians destroy the economy because they are stupid or because that is their intended objective? I don't think that is a trivial question.Bob Roddishttps://www.blogger.com/profile/17263804608074597937noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-82186873391134720862013-02-02T10:15:34.422-05:002013-02-02T10:15:34.422-05:00JG asked "Do you really believe that QE is re...JG asked "Do you really believe that QE is really a conspiracy to inflate MBS prices?"<br /><br />Not a conspiracy. Its part of the policy objectiveMikenoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-8990005266324800132013-02-02T09:56:41.111-05:002013-02-02T09:56:41.111-05:00Bob, here comes the "help"
http://www.b...Bob, here comes the "help"<br /><br />http://www.bloomberg.com/news/2013-01-18/retirement-savings-accounts-draw-u-s-consumer-bureau-attention.htmlMikenoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-19035382664575492732013-02-01T22:52:01.322-05:002013-02-01T22:52:01.322-05:00In the weak, corrupt and narcissistic brain of a K...In the weak, corrupt and narcissistic brain of a Keynesian, average people are helpless and hopeless without the firm guidance of the Keynesian with his SWAT team. For example, people are too dumb to save up so that they can afford to buy finished products*. They must be provided with new and additional purchasing power which, unfortunately for them, is stolen via funny money dilution and Cantillon Effects from other average people. And vice versa from them to others. What a brilliant solution to a problem that does not even exist.<br /><br />*Of course, those same people are smart enough to elect the proper "progressive" bureaucrat.Bob Roddishttps://www.blogger.com/profile/17263804608074597937noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-9963335473082136802013-02-01T22:17:34.368-05:002013-02-01T22:17:34.368-05:00People who own crummy MBS don't need "liq...People who own crummy MBS don't need "liquidity". What they need to know is the actual price that free people will pay for the securities in a voluntary exchange. If no one will buy them, that is ok, because the owners of the securities might learn an important lesson in life from a bad experience.Bob Roddishttps://www.blogger.com/profile/17263804608074597937noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-81009445515147894702013-02-01T20:10:29.416-05:002013-02-01T20:10:29.416-05:00Is that really what the Fed's goal is? To keep...<i>Is that really what the Fed's goal is? To keep prices high? Do you really believe that QE is really a conspiracy to inflate MBS prices?<br /><br />Someone less given to conspiracy theories would assume that the Fed was buying MBS to maintain liquidity in the financial system to faciliate lending during a time of weak demand.</i><br /><br />If people want cash and not stupid securities, they could just sell them to other mundanes, right? They would then have cash and not securities. If the Fed buys anything, it's obviously the highest bidder, bidding up the price higher than it would otherwise be. Otherwise, someone would have outbid the Fed.<br /><br />If there is "weak demand", it means "consumers" are broke. Why should anyone lend money while "consumers" are broke?Bob Roddishttps://www.blogger.com/profile/17263804608074597937noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-69313752007137755162013-02-01T20:02:12.135-05:002013-02-01T20:02:12.135-05:00@ Anderson,
"The Fed wants to drive money to...@ Anderson,<br /><br />"The Fed wants to drive money toward those assets by keeping their prices artificially high..."<br /><br />Is that really what the Fed's goal is? To keep prices high? Do you really believe that QE is really a conspiracy to inflate MBS prices?<br /><br />Someone less given to conspiracy theories would assume that the Fed was buying MBS to maintain liquidity in the financial system to faciliate lending during a time of weak demand. JGnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-28723986359666284852013-02-01T17:16:55.654-05:002013-02-01T17:16:55.654-05:00Sorry. Clarification $20 by end of 2017Sorry. Clarification $20 by end of 2017Mikenoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-67940568693764543782013-02-01T17:15:30.782-05:002013-02-01T17:15:30.782-05:00Joe, respects interest rates I agree with you fund...Joe, respects interest rates I agree with you fundamentally. According to my modeling the 10 yr T-Note should have a yield presently between 5.5% and 6%.<br /><br /> However the system can’t tolerate a rate increase without crashing it. The stock of debt and new flow into that stock is too large. The USG is on a trajectory to be at a debt of $20T excluding unfunded liabilities. At a normalized historical 5% interest rate (and that is a bit low) you’re looking at $1T in annualized interest costs. Not sustainable. <br /><br />Under this environment the Fed is left with QE to infinity to suppress interest rates until the currency/sovereign bond market implodes. The system resets and the associated social chaos is worked through. I’m not suggesting that’s the only path it will follow, just the most logical based on the facts and policy actions we have at present.<br /><br />Progressives have their heads stuck in a vacuum sealed utopian vision. Thus they can’t or won’t see the obvious. <br />Mikenoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-33044373397163743132013-02-01T16:47:45.720-05:002013-02-01T16:47:45.720-05:00Also, I'd be willing to bet that interest rate...Also, I'd be willing to bet that interest rates will start to tick upward over the course of this year. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-10084501394934323772013-02-01T16:44:45.049-05:002013-02-01T16:44:45.049-05:00Mike, I believe that according to JPM, the Fed wil...Mike, I believe that according to JPM, the Fed will be purchase about 90% of all net new bonds, and almost 70% of Treasury issued government debt. Not to mention that it is already the largest holder of such Treasuries. So yeah, LK's statement is pretty laughable.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-80303079457566897232013-02-01T15:39:23.138-05:002013-02-01T15:39:23.138-05:00LK said: “Investors all over the world have fled t...LK said: “Investors all over the world have fled to US government treasuries since 2008, so demand from them would still be high.”<br /><br />So that’s why the Fed has to engage in a money printing…errr FOMC Strategic Asset Purchase program to the tune of $85B per month. Right? Gee I hate to see what the program would need to be without “high demand.” Wait a bit we are probably going to find out. <br />Mikenoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-13654945120306108982013-02-01T15:36:01.459-05:002013-02-01T15:36:01.459-05:00LK said: “No, businesses will invest if demand is ...LK said: “No, businesses will invest if demand is sufficient”<br /><br />Really? Let’s rewind the time machine back a few years shall we. What was the “demand” the general category of a “smart” phone before the even existed? How could the public demand something that didn’t exist? You mean to tell me that companies actually invested capital in R&D, development and production of a product on the speculation of demand? Silly capitalists. <br />Mikenoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-60503923377247229432013-02-01T15:04:13.371-05:002013-02-01T15:04:13.371-05:00BARCLAYS
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Registered offic...BARCLAYS<br />Registered No – 1026167 <br />Registered office <br />1 Churchill Place, <br />London E14 5HP. <br />barclaysloan@admin.in.th<br /><br />Barclays is a trading name of Barclays Bank PLC and its subsidiaries. Barclays Bank PLC is registered in England and authorized and regulated by the Financial Services Authority (FSA No. 122702). We’re one of the largest financial services providers in the world, Also we engage in reAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-41768294175756359332013-02-01T12:34:00.944-05:002013-02-01T12:34:00.944-05:00Good point, Martin. The Soviets had a much more ef...Good point, Martin. The Soviets had a much more efficient economy than ours, as they had perpetually bare shelves!!<br /><br />If the "underconsumption" theories that LK and people like Robert Reich are promoting are true, then why don't we see the pattern of unemployment rising along the consistent lines of the inequality measures? Instead, we see boom and bust, but I would like to know how inequality creates that.<br /><br />As for tax cuts, I would support them in the sense that they allow producers to make more goods, and it is the creation of goods that gives us the ability to demand more goods. LK and Krugman believe that the government can create "demand" out of thin air, which is to say the government creates wealth out of nothing. Amazing.William L. Andersonhttps://www.blogger.com/profile/01802990642236807359noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-34669898108964204712013-02-01T11:41:12.144-05:002013-02-01T11:41:12.144-05:00Actually, Professor Anderson, central planning wor...Actually, Professor Anderson, central planning worked spectacularly well when it came to keeping shelves clear. Martin Stoyanovhttp://en.wikipedia.org/wiki/Bulgarianoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-19008764626221907872013-02-01T10:49:58.354-05:002013-02-01T10:49:58.354-05:00"Tax cuts and fiscal stimulus will create the..."Tax cuts and fiscal stimulus will create the demand."<br /><br />I'm quite certain Prof. Anderson would endorse tax cuts.<br /><br />"perhaps in your mad world a tax cut leading to more demand is forcing businesses "at gunpoint," or some such nonsense."<br /><br />I don't follow--why would he conclude this? He would certainly say this of govt directed fiscal stimulus, but I can't imagine him saying it of tax cuts.John Snoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-48276096014751940282013-02-01T10:14:10.011-05:002013-02-01T10:14:10.011-05:00Somehow "Keynesian macro-management" fee...Somehow "Keynesian macro-management" feels an awful lot like "oppressive micro-management." Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-56092184394973049622013-02-01T10:02:32.374-05:002013-02-01T10:02:32.374-05:00"Gee, those "unwilling" businesses ...<i>"Gee, those "unwilling" businesses ought to be forced at gunpoint to "invest enough," right? "</i><br /><br />And the prize for laughable straw man argument goes to .. William L. Anderson.<br /><br />No, businesses will invest if demand is sufficient. Tax cuts and fiscal stimulus will create the demand. But perhaps in your mad world a tax cut leading to more demand is forcing businesses "at gunpoint," or some such nonsense.<br /><br /><i>"I guess that is why you believe that bureaucrats should be in charge and that central planning always will work perfectly. "</i><br /><br />Keynesian macro-management is not central planning.<br /><br />If "central planning" is to have any coherent meaning in economics, it means Soviet style economies where ALL production and consumption is planned.<br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-55046690654993550952013-02-01T09:29:30.937-05:002013-02-01T09:29:30.937-05:00Gee, those "unwilling" businesses ought ...Gee, those "unwilling" businesses ought to be forced at gunpoint to "invest enough," right? I'm sure, LK, that you and other Keynesians know the "optimal" amount of business investment since Keynesians know everything.<br /><br />Has it ever occurred to you that your view of an economy is nothing more than that of a mechanistic model in which consumption is not done by individuals acting purposely to meet their need, but rather is an activity which is done in order to clear the shelves so that there can be more production? I guess that is why you believe that bureaucrats should be in charge and that central planning always will work perfectly.William L. Andersonhttps://www.blogger.com/profile/01802990642236807359noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-41575015687721298962013-02-01T08:21:38.537-05:002013-02-01T08:21:38.537-05:00(1) The Fed's asset purchases are mostly gover...(1) The Fed's asset purchases are mostly government bonds. Investors all over the world have <i>fled to</i> US government treasuries since 2008, so demand from them would still be high.<br /><br />Anyway, these bond purchases do not stop or impair businesses from their capital goods investment projects. <br /><br />If anything, it is shortfall of demand for products that impairs business expectations and investment.<br /><br />(2) <i>"Second, the Fed's policies discourage savings ... etc.</i><br /><br />And yet savings rates have significantly increased since 2007. If QE has discouraged savings, strange that savings have risen:<br /><br />http://www.creditwritedowns.com/2010/02/chart-of-the-day-u-s-savings-rate-over-last-60-years.html<br /><br />As for actual funds available for investment, there is a vast reserve of them now: literally all those excess reserves created by QE. Real resources are also available in the US economy - or from overseas.<br /><br />The main problem is insufficient demand for products, the principal consequence of which is poor expectations by businesses and unwillingness to investment enough.<br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6276561747841568697.post-1059208148140142922013-01-31T20:41:32.411-05:002013-01-31T20:41:32.411-05:00TYPO: The second sentence should say:
Further, by...TYPO: The second sentence should say:<br /><br /><i>Further, by imposing perpetual bad times, the low rates apparently make government bonds the "safest" place to put money for one's savings.</i>Bob Roddishttps://www.blogger.com/profile/17263804608074597937noreply@blogger.com