tag:blogger.com,1999:blog-582368152716771238.post1790930334629477533..comments2024-03-29T07:18:14.271-05:00Comments on The Grumpy Economist: Eight Heresies of Monetary PolicyJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-582368152716771238.post-45086662631235378912018-02-15T17:28:25.982-06:002018-02-15T17:28:25.982-06:00Doesn't the FED's intervention/participati...Doesn't the FED's intervention/participation in the market for UST and MBS drive up the price of those securities, all other factors considered? <br /><br />Doesn't driving up the price of those securities lower the interest rate for UST and MBS? <br /><br />The intervention was a massive one, and has yet to be unwound. Indeed, the coupons and redemptions of UST and MBS are being reinvested into new purchases.<br /><br />Until the FED's participation in the UST and MBS markets ends, I dont think you can really say what the interest rate is.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-40928679788637783132017-12-07T13:46:52.413-06:002017-12-07T13:46:52.413-06:00Excellent article, thank you. Will somebody please...Excellent article, thank you. Will somebody please study Switzerland as an example of a country where real wage increases are created by stable/falling prices and unemployment is low. Why does the Fed persist in aiming for 2% annual inflation? Ditto Japan, where productivity growth has been respectable and unemployment low with stable CPI. Japanese low aggregate growth is largely due to demographics, not monetary policy. Christian Wignallhttps://www.blogger.com/profile/15184466233748245233noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-60063780484792096072017-12-06T11:04:18.754-06:002017-12-06T11:04:18.754-06:00Outstanding summary of your views in an excessable...Outstanding summary of your views in an excessable format for broad readership. My only quibble is in your simplified anolgy of the Fed steralizing their bond purchased with reserves. Yes, the end result was exchanging a $20 bill for two fives and a ten, but this result was via interest rate on reserves. The Fed could have also booked their corresponding liability to offset their new bond assets with currency which would likely have been lent out. Roll out the printing press. But they induced banks to instead keep them in reserves by paying more than other liquid assets. The Fed could have done more to inflate money supply, but opted not to. Jon Seedhttps://www.blogger.com/profile/10891730332574311014noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-17171725625672456762017-12-03T07:11:40.584-06:002017-12-03T07:11:40.584-06:00That GDP growth looks fishy. Has it never exceede...That GDP growth looks fishy. Has it never exceeded 2% since 1994?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-77484881023033871752017-12-01T16:48:25.119-06:002017-12-01T16:48:25.119-06:00"The federal funds rate is the interest rate ..."The federal funds rate is the interest rate that the Federal Reserve controls." is where you should've stopped this post. Go read Sumner among others. Geez...rtdnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-27561955595246060192017-11-30T14:38:43.529-06:002017-11-30T14:38:43.529-06:00What is your opinion of the rise in global asset p...What is your opinion of the rise in global asset prices vs the rise in central bank balance sheets and what is your prediction for global asset prices now that the central bank balance sheets are leveling off or declining?Harry Chernoffhttps://www.blogger.com/profile/12034671239056869403noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-69375986755115529962017-11-30T11:34:02.099-06:002017-11-30T11:34:02.099-06:00Interest rates for bonds are somewhat decoupled fr...Interest rates for bonds are somewhat decoupled from the real world. In the sense that there are a number of ETFs or other investment vehicles that mandate investment in treasuries. Those funds in turn are blended into diversified investment vehicles. Those vehicles require a certain level of bond investment, and they invest irrespective of the return. This explains why anyone would invest in a security with a negative return - because they have no choice under their investment returns.<br /><br />I also wonder if this setup contributes to the current increase in the stock market - if you can issue debt very very cheaply, then logically the surplus must accrue to stock holders.PaulLhttps://www.blogger.com/profile/17880559466808887420noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-51367017718813093152017-11-30T08:03:10.792-06:002017-11-30T08:03:10.792-06:00A nit-picky point: With respect the Heresy 3, Gord...A nit-picky point: With respect the Heresy 3, Gordon Growth model, shouldn't the denominator on the left side be D, rather than E? Alternatively, the numerator on the right side should be the dividend payout ratio? Gene Labernoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-38048297902101835102017-11-30T07:17:28.405-06:002017-11-30T07:17:28.405-06:00An extremely interesting essay!An extremely interesting essay!W.E. Heasleyhttps://www.blogger.com/profile/00368333904571061995noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-82888699872462971522017-11-30T00:01:59.022-06:002017-11-30T00:01:59.022-06:00John,
"If interest rates rise to 5%, our gov...John,<br /><br />"If interest rates rise to 5%, our government will have to pay $ 1 trillion per year of additional debt service. It can't."<br /><br />Sure it can. But it would need to cut spending across the board (including military and entitlement spending), raise taxes, or convert debt to equity.<br /><br />"People seeing that crisis coming will unload government debt, try to buy real things, and drive inflation."<br /><br />Or people seeing the crisis coming will take short positions in the financial markets driving both bonds and stocks lower.<br /><br />The Heresy is that a loss of faith in government / central banking will precipitate an inflationary boom. Instead, all that may happen is a financial bust.FRestlyhttps://www.blogger.com/profile/09440916887619001941noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-45884952538302932972017-11-29T14:28:18.282-06:002017-11-29T14:28:18.282-06:00Real interest rates seem to have been in a declini...Real interest rates seem to have been in a declining trend since ~1825 as the world that became more productive, lives became longer and financial markets became more efficient. <br /><br />Agree with #1-4. For #5-7 I have anywhere from doubts to disagreement.<br /><br />#8 - agree. Inflation comes from government mistakes. The 1970s certainly did. Enacting a tax cut that increases the fiscal and trade deficits at this time is probably not a good plan. Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.com