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Thread: Monetary Policy

  1. #76
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    ^ agreed!

    Ppl are fucked.


  2. #77
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    Want to correct/provide context for this Krugman article I posted earlier. I knew he didn’t believe in MMT/‘deficits don’t matter’, but that seemed like what he was arguing here. However, this argument was specifically referencing what would happen if the bond market lost confidence -when a country's economy is depressed- and they are trying to stimulate the economy to bring it back to full employment.

    Here’s what Krugman has to say about MMT:

    Deficits and the Printing Press (Somewhat Wonkish)

    MARCH 25, 2011 3:32 PM March 25, 2011 3:32 pm 173
    Right now, deficits don’t matter — a point borne out by all the evidence. But there’s a school of thought — the modern monetary theory people — who say that deficits never matter, as long as you have your own currency.
    I wish I could agree with that view — and it’s not a fight I especially want, since the clear and present policy danger is from the deficit peacocks of the right. But for the record, it’s just not right.
    The key thing to remember is that current conditions — lots of excess capacity in the economy, and a liquidity trap in which short-term government debt carries a roughly zero interest rate — won’t always prevail. As long as those conditions DO prevail, it doesn’t matter how much the Fed increases the monetary base, and it therefore doesn’t matter how much of the deficit is monetized. But this too shall pass, and when it does, things will be very different.
    So suppose that we eventually go back to a situation in which interest rates are positive, so that monetary base and T-bills are once again imperfect substitutes; also, we’re close enough to full employment that rapid economic expansion will once again lead to inflation. The last time we were in that situation, the monetary base was around $800 billion.
    Suppose, now, that we were to find ourselves back in that situation with the government still running deficits of more than $1 trillion a year, say around $100 billion a month. And now suppose that for whatever reason, we’re suddenly faced with a strike of bond buyers — nobody is willing to buy U.S. debt except at exorbitant rates.
    So then what? The Fed could directly finance the government by buying debt, or it could launder the process by having banks buy debt and then sell that debt via open-market operations; either way, the government would in effect be financing itself through creation of base money. So?
    Well, the first month’s financing would increase the monetary base by around 12 percent. And in my hypothesized normal environment, you’d expect the overall price level to rise (with some lag, but that’s not crucial) roughly in proportion to the increase in monetary base. And rising prices would, to a first approximation, raise the deficit in proportion.
    So we’re talking about a monetary base that rises 12 percent a month, or about 400 percent a year.
    Does this mean 400 percent inflation? No, it means more — because people would find ways to avoid holding green pieces of paper, raising prices still further.
    I could go on, but you get the point: once we’re no longer in a liquidity trap, running large deficits without access to bond markets is a recipe for very high inflation, perhaps even hyperinflation. And no amount of talk about actual financial flows, about who buys what from whom, can make that point disappear: if you’re going to finance deficits by creating monetary base, someone has to be persuaded to hold the additional base.
    At this point I have to say that I DON’T EXPECT THIS TO HAPPEN — America is a very long way from losing access to bond markets, and in any case we’re still in liquidity trap territory and likely to stay there for a while. But the idea that deficits can never matter, that our possession of an independent national currency makes the whole issue go away, is something I just don’t understand.”

    https://archive.nytimes.com/krugman....etType=PAYWALL

    (Apologies. It’s been several years since I’ve immersed myself in this stuff daily.)


  3. #78
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    75 points. Again. Okay. It makes sense.

    But just saw a blurb that 125 more basis points are being priced into the market?

    Holy shit.

    But it’s ironic. Inflation in prices is somewhat controlled by easy money. But if the legislature keeps spending, how can a reserve bank keep shit under control?

  4. #79
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    It's a wazy it's a woozy

  5. #80
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    Canada raised the rate 75 points a few weeks ago
    Lee Lau - xxx-er is the laziest Asian canuck I know

  6. #81
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    Can someone explain to me why the Fed continued to purchase massive amounts of mortgage backed securities and did not stop buying entirely until the middle of this month. Why did they feel it was necessary to "prop" up an already overheated housing market?

  7. #82
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    Monetary Policy

    The same reason their “dot plot” pointed to .50 interest rate increases just 12 months ago.

    Powell said said early this year they didn’t want to spook the market so stuck to the plan with rates and QT. Now they’re flying blind looking in the rear view mirror. Maybe they get away with it but perhaps Japan is right in that inflation pressures are not interest rate driven.

  8. #83
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    Quote Originally Posted by bigdude2468 View Post
    Can someone explain to me why the Fed continued to purchase massive amounts of mortgage backed securities and did not stop buying entirely until the middle of this month. Why did they feel it was necessary to "prop" up an already overheated housing market?
    Well the corrupt banks the Fed board used to work for (and will work for again after leaving the Fed) got addicted to free money, and threw tantrums in the form of sell offs every time the Fed indicated they *might maybe think an itsy bitsy bit* about very slightly slowing that flow of money directly to the banks.

  9. #84
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    Hot girl explaining monetary policy:

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    https://twitter.com/ninaturner/statu...SF65kU2rsAmpbg

  10. #85
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    Later this year the US National Debt will surpass $31.536 Trillion.
    At that time, at the rate of $1 per second, it would take 1 Million Years to repay the Debt.
    ONE MILLION YEARS!

    $1 sec
    $60 min
    $3600 hour
    $86,400 day
    $604,800 wk
    $2,592,000 month
    $31,536,000 year

    $1 Million 11.57 days
    $1 Billion 31.71 years
    $1 Trillion - 31,709 years
    $31,536,000,000,000 - 1 Million years

    This is the result of US Monetary Policy and these numbers are just plain silly!
    Does anyone believe this will end any other way than by default?
    "The mind, once expanded to the dimensions of larger ideas, never returns to its original size."

  11. #86
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    Quote Originally Posted by powpig View Post
    Later this year the US National Debt will surpass $31.536 Trillion.
    At that time, at the rate of $1 per second, it would take 1 Million Years to repay the Debt.
    ONE MILLION YEARS!

    $1 sec
    $60 min
    $3600 hour
    $86,400 day
    $604,800 wk
    $2,592,000 month
    $31,536,000 year

    $1 Million 11.57 days
    $1 Billion 31.71 years
    $1 Trillion - 31,709 years
    $31,536,000,000,000 - 1 Million years

    This is the result of US Monetary Policy and these numbers are just plain silly!
    Does anyone believe this will end any other way than by default?
    That’s fiscal policy - taxing and spending - which the Fed doesn’t control, but have to react to.

  12. #87
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    Quote Originally Posted by J. Barron DeJong View Post
    That’s fiscal policy - taxing and spending - which the Fed doesn’t control, but have to react to.
    right
    but the point is boomers keep riding the debt train to death and who is paying for this in the end?
    since taxes are evil and gov't spending is necessary we keep on keeping on

    I absolutely love how all these high rollers are starting to cry about the interest rate hikes
    since they are always playing with other peoples money and hedging their bets it suddenly got alittle harder to rape the rest of us

  13. #88
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    Quote Originally Posted by powpig View Post
    Does anyone believe this will end any other way than by default?
    This tired old trope is nonsense just like it was when my old man would froth about it in the early 90's.

  14. #89
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    Quote Originally Posted by skaredshtles View Post
    This tired old trope is nonsense just like it was when my old man would froth about it in the early 90's.
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    https://www.marketwatch.com/amp/stor...sis-2018-05-14

    Japan has not defaulted.

    The real risk is to countries who don’t borrow in their own currency.

  15. #90
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    Quote Originally Posted by powpig View Post
    Does anyone believe this will end any other way than by default?
    Only if the country dies or retires or becomes disabled.
    focus.

  16. #91
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    Nobel Prize for economics went to Bernanke, Diamond, and Dybvig for their work on banking and financial crises.

    Some descriptions of their work:

    https://marginalrevolution.com/margi...ond-and-dybvig

    https://marginalrevolution.com/margi...d-dybvig-model

    https://marginalrevolution.com/margi...f-ben-bernanke


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    Last edited by J. Barron DeJong; 10-10-2022 at 09:59 AM.

  17. #92
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  18. #93
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    Click image for larger version. 

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    https://twitter.com/jasonfurman/stat...PkuW7TbVFOmB5g

    The housing component used in official core inflation data looks well back in time (like a year, apparently) so core - which is 40% housing - missed how drastically housing costs were increasing. But it’s about to start doing the opposite, perhaps leading the Fed to overtighten going forward.

  19. #94
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    Lee Lau - xxx-er is the laziest Asian canuck I know

  20. #95
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    Good overview of the inflation situation of the past two years, and going forward:

    https://jabberwocking.com/its-time-t...-of-inflation/

    Click image for larger version. 

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    It's a little complicated. Sorry about that. But the orange line shows Jason Furman's revised measurement of core inflationusing actual rents instead of official BLS rent measurements that are six months out of date. What we now know is that rents skyrocketed in mid-2021 and core inflation was even higher than we thought. It hit 18% month-over-month in June of 2021!But don't look at that. Look at the trendline. It's just a simple least-squares regression, so it's not rocket science. But it does a good job of smoothing the monthly data, and we now have figures for nearly two years to look at. Here's what it shows us: the trendline for modified core inflation peaked in September 2021 and then started declining.
    Team Transitory was right all along. When you look at a better measure of core inflation, it peaked higher than we thought and sooner than we thought. It's been declining pretty steadily for the past 15 months.”

    (more at the link)

  21. #96
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    That’s so fucked up. Yea his trend line is going down!!

    Admittedly good data to understand the trend.

    But show me the curve of actual wages and actual consumer prices.

    I know it will look insane.

  22. #97
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    Quote Originally Posted by Core Shot View Post
    That’s so fucked up. Yea his trend line is going down!!

    Admittedly good data to understand the trend.

    But show me the curve of actual wages and actual consumer prices.

    I know it will look insane.
    The discussion is about monetary policy, and what the Fed is doing, etc.

    The point is that the Fed targets core CPI in setting interest rates to control inflation, but there are issues with the housing measurements in official core CPI (only measured twice a year, and looks at all rents, not just new) and so looking at this alternative core measurement which uses new monthly rent data collected by industry -may- provide a better real time estimate of where core CPI is.

  23. #98
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    Here’s headline and official core CPI from the release two days ago:

    Click image for larger version. 

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    https://jabberwocking.com/inflation-...e-in-november/

    (wages are in the first chart I posted)

    Edit:

    Here’s wages and headline CPI, indexed such that they both equal 100 at the start of 2020, so you can see the changes clearly.

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    Last edited by J. Barron DeJong; 12-15-2022 at 12:23 PM.

  24. #99
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    Quote Originally Posted by skaredshtles View Post
    This tired old trope is nonsense just like it was when my old man would froth about it in the early 90's.
    In the 80's there was a year where almost 50% of tax revenues went to pay interest on the national debt. And yet... we survived.

    The US gov will engage in financial repression well before they default. Also we could just open the gates to some more young hard working taxpayers.... but o well.

  25. #100
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    Interest payments as % of revenue peaked at 19.2% in 1985.
    Attached Thumbnails Attached Thumbnails Click image for larger version. 

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    Last edited by dunfree ; 12-15-2022 at 02:00 PM.

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