Financial News

[Balta1701]

Missing his point though. For one, he never said anything was great about the economy. Didn't even hint at it. That was entirely made up by you. For another thing, what he is really getting at is, what is the Fed's role in this? Should they be narrowly focused on monetary policy (inflation, currency balance risk, etc.), or should they also use monetary policy as a tool to shape the broader economy?

 

And I know, that you know, that is what he meant. You are being intentionally obtuse.

You can't possibly be as obtuse as you're being here...should the Fed be narrowly focused on monetary policy? You're literally asking whether the Fed should ignore 1/2 of the law.

The Congress established two key objectives for monetary policy--maximum employment and stable prices--in the Federal Reserve Act. These objectives are sometimes referred to as the Federal Reserve's dual mandate.

 

Remember, the guy with that quote was justifying his vote against additional monetary stimulus measures, in this case the "Twist".

[southsider2k5]

And when you exclude those, the numbers still remain well below trend.

 

Your assumption of it excluding housing is not true.

[Balta1701]

Your assumption of it excluding housing is not true.

Fine. Care to show me something which shows true, demand >> supply driven inflation taking off? Especially the evidence for the large spiraling wage increases.

[southsider2k5]

Fine. Care to show me something which shows true, demand >> supply driven inflation taking off? Especially the evidence for the large spiraling wage increases.

 

Have you missed the record commodities prices? The record energy prices of that last year?

[Balta1701]

Have you missed the record commodities prices? The record energy prices of that last year?

And clearly this is happening because the economy has reached full capacity, full employment, and is simply incapable of producing the goods and services that the economy demands. As such, we're going to expect a significant cycle of wage increases if the Federal Reserve doesn't raise interest rates. After all, banks are lending out money like crazy right now, the investment market is as hot as it can be, and you can't find an unemployed person anywhere.

 

Either that or you don't have any concept of the inflation-unemployment tradeoff.

[southsider2k5]

And clearly this is happening because the economy has reached full capacity, full employment, and is simply incapable of producing the goods and services that the economy demands. As such, we're going to expect a significant cycle of wage increases if the Federal Reserve doesn't raise interest rates. After all, banks are lending out money like crazy right now, the investment market is as hot as it can be, and you can't find an unemployed person anywhere.

 

Either that or you don't have any concept of the inflation-unemployment tradeoff.

 

I guess I don't have a concept of left wing "reality".

[Balta1701]

I guess I don't have a concept of left wing "reality".

The Phillips Curve = left wing reality. Right.

[StrangeSox]

BOND VIGILANTES!!1

[StrangeSox]

The Phillips Curve = left wing reality. Right.

reality has a liberal bias

[southsider2k5]

The Phillips Curve = left wing reality. Right.

 

We have commodity based inflation all over the place, and that isn't good enough for you? Hell the the biggest tax of all against the poor is things like energy and food prices. I guess the poor don't really matter though because pretty much any left wing policy towards food and energy involves making them more expensive anyway.

[Balta1701]

We have commodity based inflation all over the place, and that isn't good enough for you? Hell the the biggest tax of all against the poor is things like energy and food prices. I guess the poor don't really matter though because pretty much any left wing policy towards food and energy involves making them more expensive anyway.

No, that isn't good enough for me, because the response to it should not be "Let's take fewer steps to help the unemployment rate". Of course you're going to say that's somehow not what you're arguing...but again, I'll come back to the inverse relationship between inflation and employment for that. But that's left-wing economics again.

 

The best way to get commodity prices down and under control would be to substantially slash the economy again. If we decrease economic performance, we will again decrease demand for those goods.

 

Otherwise, you're going to have to deal with the fact that commodities have suddenly become constrained due to an effect which isn't demand outstripping potential economic performance.

[NorthSideSox72]

You can't possibly be as obtuse as you're being here...should the Fed be narrowly focused on monetary policy? You're literally asking whether the Fed should ignore 1/2 of the law.

 

 

Remember, the guy with that quote was justifying his vote against additional monetary stimulus measures, in this case the "Twist".

For each of those two items, monetary policy has the ability to play a role. But that role can vary a lot, and in both cases, you have the problems of limited armament available, and of extent of effect versus other actions outside the Fed.

 

When it comes to stable prices, monetary policy plays a big role (though there are other factors as well). That role has relatively predictable effects, and it is a direct action. Therefore, the actions take on that side are much more clear in need and response. But even in that case, other factors play in, and you do not have unlimited abilities.

 

But when it comes to maximum employment, the effects of monetary policy are much weaker. If one believes that other actions - whether tax cuts or governmental stimulative spending, for example - would be more effective, and leave the Fed with more flexibility, then you have to weigh those. Just because certain members of the Fed board feel that other methods may work better, that doesn't mean they are "ignoring half the law". It means they think that further action on their part in regards to employment is either too risky, or has too little effect, to be a worthwhile endeavor.

 

This is just not as black and white as you are making it.

 

[southsider2k5]

No, that isn't good enough for me, because the response to it should not be "Let's take fewer steps to help the unemployment rate". Of course you're going to say that's somehow not what you're arguing...but again, I'll come back to the inverse relationship between inflation and employment for that. But that's left-wing economics again.

 

The best way to get commodity prices down and under control would be to substantially slash the economy again. If we decrease economic performance, we will again decrease demand for those goods.

 

Otherwise, you're going to have to deal with the fact that commodities have suddenly become constrained due to an effect which isn't demand outstripping potential economic performance.

 

By all means, throw more money at the employment problem, crush the dollar, create more inflation, and don't see the unemployment rate come down again. I'm sure that will help the poor.

[Balta1701]

For each of those two items, monetary policy has the ability to play a role. But that role can vary a lot, and in both cases, you have the problems of limited armament available, and of extent of effect versus other actions outside the Fed.

 

When it comes to stable prices, monetary policy plays a big role (though there are other factors as well). That role has relatively predictable effects, and it is a direct action. Therefore, the actions take on that side are much more clear in need and response. But even in that case, other factors play in, and you do not have unlimited abilities.

 

But when it comes to maximum employment, the effects of monetary policy are much weaker. If one believes that other actions - whether tax cuts or governmental stimulative spending, for example - would be more effective, and leave the Fed with more flexibility, then you have to weigh those. Just because certain members of the Fed board feel that other methods may work better, that doesn't mean they are "ignoring half the law". It means they think that further action on their part in regards to employment is either too risky, or has too little effect, to be a worthwhile endeavor.

 

This is just not as black and white as you are making it.

Of course, you really don't think it's going to be hard for me to find 2009 and 2010 vintage quotes from Chairman Plosser arguing that fiscal and monetary stimulus had served their purpose, we'd average 3-4% growth in 2010 and 2011, and the Federal Reserve should pull back on its QE1 programs and not do QE2 because it will drive massive inflation...do you?

Here's his argument in 2009 that it was time to start pulling back (I haven't excerpted his predictions about growth, which were also missed).

In the current circumstances, the Fed will need to withdraw the extraordinary amount of liquidity it has provided to financial markets to ensure that the public does not lose confidence in its commitment to keep inflation low and stable. If it fails to do so, rising inflation expectations could prompt workers to demand higher wages and firms to demand higher prices to head off the expectation of higher costs, thus setting off a burst of inflation. For me, this risk bears careful monitoring.

Conclusion

 

In conclusion, the economy is emerging from a severe recession with a low level of economic activity and a low rate of inflation. Improvements in the job market will lag behind the rest of the economy as they typically do. Conditions in financial markets have been improving, and the need for the Fed's extraordinary provision of liquidity will continue to dissipate in the coming months. Withdrawing that liquidity in a timely manner will be important in keeping the outlook for inflation and inflation expectations low and stable.

 

But to conduct monetary policy we need to be forward-looking and, looking ahead, I see an economy that will be growing over the next two years, which means real interest rates will be rising. As they do, the federal funds rate should be permitted to rise with them. By doing so, the Fed can promote stable inflationary expectations and achieve its goals of price stability and sustainable growth. If it fails to do so, it risks missing its goals and creating unnecessary instability in the process.

ANd here's him in 2010 on how QE2 would overheat things.

 

[southsider2k5]

Of course, you really don't think it's going to be hard for me to find 2009 and 2010 vintage quotes from Chairman Plosser arguing that fiscal and monetary stimulus had served their purpose, we'd average 3-4% growth in 2010 and 2011, and the Federal Reserve should pull back on its QE1 programs and not do QE2 because it will drive massive inflation...do you?

Here's his argument in 2009 that it was time to start pulling back (I haven't excerpted his predictions about growth, which were also missed).

 

ANd here's him in 2010 on how QE2 would overheat things.

 

The funny part is that about the time energy prices peaked, the economy fell off, just like I predicted it would.

[NorthSideSox72]

Of course, you really don't think it's going to be hard for me to find 2009 and 2010 vintage quotes from Chairman Plosser arguing that fiscal and monetary stimulus had served their purpose, we'd average 3-4% growth in 2010 and 2011, and the Federal Reserve should pull back on its QE1 programs and not do QE2 because it will drive massive inflation...do you?

Here's his argument in 2009 that it was time to start pulling back (I haven't excerpted his predictions about growth, which were also missed).

 

ANd here's him in 2010 on how QE2 would overheat things.

What does that have to do with my post?

 

[Balta1701]

The funny part is that about the time energy prices peaked, the economy fell off, just like I predicted it would.

I'm pretty sure I've been writing that we're in an oil-supply-constrained economy since the 2008 price spike.

 

The corollary to your statement is that any time the global economy tries to grow, if it doesn't become more energy efficient, it will cause a price spike that will cause yet another fall off.

[southsider2k5]

I'm pretty sure I've been writing that we're in an oil-supply-constrained economy since the 2008 price spike.

 

The corollary to your statement is that any time the global economy tries to grow, if it doesn't become more energy efficient, it will cause a price spike that will cause yet another fall off.

 

So clearly we should protest and halt all efforts to increase supply.

[NorthSideSox72]

I'm pretty sure I've been writing that we're in an oil-supply-constrained economy since the 2008 price spike.

 

The corollary to your statement is that any time the global economy tries to grow, if it doesn't become more energy efficient, it will cause a price spike that will cause yet another fall off.

 

 

So clearly we should protest and halt all efforts to increase supply.

 

On this point I am actually going to side with Balta AND ss2K5. Darn right we should increase supply... but adding supply that isn't from a limited-supply fossil fuel.

 

I am still 100% convinced that if the US government should be supporting any line of business right now, at all, it should be renewable energy. The positive impacts are simply huge.

 

[Balta1701]

What does that have to do with my post?

Just because certain members of the Fed board feel that other methods may work better, that doesn't mean they are "ignoring half the law". It means they think that further action on their part in regards to employment is either too risky, or has too little effect, to be a worthwhile endeavor.

 

Yes, he consistently predicts that additional fed action is too risky, and he has also based those predictions on estimates of recovery, growth, and inflationary responses that have been significantly optimistic.

[Balta1701]

So clearly we should protest and halt all efforts to increase supply.

Which is, of course, the exact opposite of what we've been doing. But every time I point out that drilling in the U.S. is as active as its been since the 1970's, I hear crickets chirping.

[Balta1701]

I am still 100% convinced that if the US government should be supporting any line of business right now, at all, it should be renewable energy. The positive impacts are simply huge.

Which is of course why the House is so determined to cut renewable energy investments at the Federal level. After all, it's clearly wasteful spending.

[southsider2k5]

Which is, of course, the exact opposite of what we've been doing. But every time I point out that drilling in the U.S. is as active as its been since the 1970's, I hear crickets chirping.

 

Obviously we need more than we have added if the prices are up 50% since Obama took over, how is that not totally obvious? Especially when green energy policy in this country consists of giveaways to Democratic supports that aren't being based in reality, nor properly vetted.

[Balta1701]

Obviously we need more than we have added if the prices are up 50% since Obama took over, how is that not totally obvious? Especially when green energy policy in this country consists of giveaways to Democratic supports that aren't being based in reality, nor properly vetted.

You're right...we need more energy production...but you still seem unclear on the concept. The global economy needs more energy than the globe can possibly produce from fossil fuels.

 

The world is drilling and pumping like mad. The world has had energy prices through the roof for 7-8 years. It has not produced an increased production of fossil fuel energy...energy production has simply stayed flat. This isn't just happening in the U.S., it's happening everywhere.

 

And "Since Obama took over"...do you realize how foolish using that standard makes you look? The stock market is up 40% since Obama took over, clearly everything must be fine and Obama is the best President for business in U.S. History, right? unless the January 2009 circumstances were somehow unique.

[southsider2k5]

You're right...we need more energy production...but you still seem unclear on the concept. The global economy needs more energy than the globe can possibly produce from fossil fuels.

 

The world is drilling and pumping like mad. The world has had energy prices through the roof for 7-8 years. It has not produced an increased production of fossil fuel energy...energy production has simply stayed flat. This isn't just happening in the U.S., it's happening everywhere.

 

And "Since Obama took over"...do you realize how foolish using that standard makes you look? The stock market is up 40% since Obama took over, clearly everything must be fine and Obama is the best President for business in U.S. History, right? unless the January 2009 circumstances were somehow unique.

 

You're right. I'm unclear on the concept. I am just imaging the attempts to block pipelines, drilling, and other ways of increasing the energy supply. Production is flat, prices are up, and we need to stop any other attempts to do more, because they won't be "enough" even though increasing what we can will at least limit what price increases we get. That is great logic there. No we need more crony capitalism in the green markets to save us all. Please. Increases in green energy would be acceptable if there weren't massive efforts to stop traditional production whenever possible. It is talking outside of both sides of your mouth. If the answer is more production then tell the Democrats to stop blocking more production. These things don't have to be mutually exclusive. That is where you are unclear on the concept. The biggest issue is the green energy isn't profitable when energy prices are to low, and that is why there is the concerted effort to keep them artificially high.