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Fed predictions vs actual

Chang29
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5/9/2015 12:18:35 AM
Posted: 1 year ago
In an interesting post by Peter Schiff "The Embarrassment of Transparency" http://www.europac.com...

Peter posts an interest table on projected growth compared with real growth.

Central Tendency (The Fed) Actual Growth (BEA)

2007 2.4% - 2.5% 1.8%

2008 1.8% - 2.5 % -0.30%

2009 -0.2% - 1.1% -2.80%

2010 2.5 % - 3.5 % 2.50%

2011 3.0% - 3.6% 1.60%

2012 2.5% - 2.9% 2.30%

2013 2.3% - 3.0% 2.20%

2014 2.8% - 3.2% 2.40%

Only, one year was in the wide range that the Fed predicted as growth.

Yet, Americas trust these same people to set interest rates at the perfect level for maximum economic growth. The economy is complex, it is all of us acting in our own best interests, the results cannot be predicted and should not be controlled.
A free market anti-capitalist

If it can be de-centralized, it will be de-centralized.
16kadams
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5/9/2015 1:26:14 AM
Posted: 1 year ago
At 5/9/2015 12:18:35 AM, Chang29 wrote:
In an interesting post by Peter Schiff "The Embarrassment of Transparency" http://www.europac.com...

Peter posts an interest table on projected growth compared with real growth.

Central Tendency (The Fed) Actual Growth (BEA)

2007 2.4% - 2.5% 1.8%

2008 1.8% - 2.5 % -0.30%

2009 -0.2% - 1.1% -2.80%

2010 2.5 % - 3.5 % 2.50%

2011 3.0% - 3.6% 1.60%

2012 2.5% - 2.9% 2.30%

2013 2.3% - 3.0% 2.20%

2014 2.8% - 3.2% 2.40%

Only, one year was in the wide range that the Fed predicted as growth.

Yet, Americas trust these same people to set interest rates at the perfect level for maximum economic growth. The economy is complex, it is all of us acting in our own best interests, the results cannot be predicted and should not be controlled.

IF Schiff predicts it you get a hard on.
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
16kadams
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5/9/2015 3:04:37 AM
Posted: 1 year ago
At 5/9/2015 12:18:35 AM, Chang29 wrote:
In an interesting post by Peter Schiff "The Embarrassment of Transparency" http://www.europac.com...

Peter posts an interest table on projected growth compared with real growth.

Central Tendency (The Fed) Actual Growth (BEA)

2007 2.4% - 2.5% 1.8%

2008 1.8% - 2.5 % -0.30%

2009 -0.2% - 1.1% -2.80%

2010 2.5 % - 3.5 % 2.50%

2011 3.0% - 3.6% 1.60%

2012 2.5% - 2.9% 2.30%

2013 2.3% - 3.0% 2.20%

2014 2.8% - 3.2% 2.40%

Only, one year was in the wide range that the Fed predicted as growth.

Yet, Americas trust these same people to set interest rates at the perfect level for maximum economic growth. The economy is complex, it is all of us acting in our own best interests, the results cannot be predicted and should not be controlled.

Also going to point out that Janet Yellen and Ben Bernanke rank above all of the inflation hawks in accuracy of their predictions. http://graphics.wsj.com...
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
Chang29
Posts: 732
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5/9/2015 3:23:19 AM
Posted: 1 year ago
At 5/9/2015 1:26:14 AM, 16kadams wrote:
At 5/9/2015 12:18:35 AM, Chang29 wrote:
In an interesting post by Peter Schiff "The Embarrassment of Transparency" http://www.europac.com...

Peter posts an interest table on projected growth compared with real growth.

Central Tendency (The Fed) Actual Growth (BEA)

2007 2.4% - 2.5% 1.8%

2008 1.8% - 2.5 % -0.30%

2009 -0.2% - 1.1% -2.80%

2010 2.5 % - 3.5 % 2.50%

2011 3.0% - 3.6% 1.60%

2012 2.5% - 2.9% 2.30%

2013 2.3% - 3.0% 2.20%

2014 2.8% - 3.2% 2.40%

Only, one year was in the wide range that the Fed predicted as growth.

Yet, Americas trust these same people to set interest rates at the perfect level for maximum economic growth. The economy is complex, it is all of us acting in our own best interests, the results cannot be predicted and should not be controlled.

IF Schiff predicts it you get a hard on.

Not saying anything about Schiff, he just wrote about the record of the Fed.

Americans trust the Fed to set the right monetary policy, and they can't not even predict the results of their own policies, even with control over measurements methods.

My point is that a small group of elites should not be making policy that effects every person with a dollar.
A free market anti-capitalist

If it can be de-centralized, it will be de-centralized.
Chang29
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5/9/2015 7:09:20 AM
Posted: 1 year ago
At 5/9/2015 3:04:37 AM, 16kadams wrote:
At 5/9/2015 12:18:35 AM, Chang29 wrote:
In an interesting post by Peter Schiff "The Embarrassment of Transparency" http://www.europac.com...

Peter posts an interest table on projected growth compared with real growth.

Central Tendency (The Fed) Actual Growth (BEA)

2007 2.4% - 2.5% 1.8%

2008 1.8% - 2.5 % -0.30%

2009 -0.2% - 1.1% -2.80%

2010 2.5 % - 3.5 % 2.50%

2011 3.0% - 3.6% 1.60%

2012 2.5% - 2.9% 2.30%

2013 2.3% - 3.0% 2.20%

2014 2.8% - 3.2% 2.40%

Only, one year was in the wide range that the Fed predicted as growth.

Yet, Americas trust these same people to set interest rates at the perfect level for maximum economic growth. The economy is complex, it is all of us acting in our own best interests, the results cannot be predicted and should not be controlled.

Also going to point out that Janet Yellen and Ben Bernanke rank above all of the inflation hawks in accuracy of their predictions. http://graphics.wsj.com...

Janet and Ben can get it right in speeches, but their subordinates can not get the predictions correct, that is poor leadership, or the speech measure could have a little wiggle room.
A free market anti-capitalist

If it can be de-centralized, it will be de-centralized.
ResponsiblyIrresponsible
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5/9/2015 9:39:22 AM
Posted: 1 year ago
At 5/9/2015 12:18:35 AM, Chang29 wrote:

Here's the key problem, though - and Ben Bernanke recently quashed the WSJ editorial page when they ran this nonsense (found here: http://www.brookings.edu...):

The Fed has indeed overestimated RGDP growth, BUT they've underestimated employment gains. In other words, RGDP grew slower than expected, but the U3 fell much faster than the expected. That can't be explained in a demand-side model, and clearly speaks to supply-side forces. For instance, productivity fell 1.9 percent annualized in Q1 and 2.1 percent annualized in Q2. Obviously supply-side forces are outside the purview of the Fed - especially a permanent backward shift in the LRAS, as I suspect to be the case, due to persistent headwinds, demographics, and hysteresis.

Here's Bernanke:

"The unemployment rate is a better indicator of cyclical conditions than the economic growth rate, and the relatively rapid decline in unemployment in recent years shows that the critical objective of putting people back to work is being met. Growth in output has been slow, despite solid job creation, because productivity gains have been slow"perhaps as the result of the financial crisis, which hammered new business formation and investment in research and development, perhaps for other reasons. But nobody claims that monetary policy can do much about productivity growth. Where it can be helpful is in supporting the return to full employment, and there the record has been reasonably good. Indeed, it seems clear that the Fed's aggressive actions are an important reason that job creation in the United States has outstripped that of other industrial countries by a wide margin."

[http://www.brookings.edu...]

If you want proof of his last remark, see this WSJ article, which compares the relative performance of the U.S., U.K., Japan, and Europe - the two former of which outperformed the latter two, because they had more expansionary fiscal and monetary policies.

[http://www.wsj.com...]

Finally, once more, the Fed does not *set* interest rates. They set a target range for one rate - a benchmark short-term interbank rate, called the federal funds rate. It actually isn't that hard to set, particularly during normal times when we can just follow a Taylor Rule to the effect of:

nominal federal funds rate = 2 + inflation rate + .5 (output gap) + .5 (inflation gap)

In other words, during normal times we expect the nominal federal funds rate to be around 4 percent - and, mind you, there are different variations of this rule which use the unemployment gap, though they tend to vary with varying measures of unemployment.

Currently, there's research suggesting that the Wicksellian equilibrium - the market-clearing interest rate - is negative and will stay negative. Let's take Robert Hall's 2013 estimate and substitute it into the Taylor Rule for the real federal funds rate (since obviously nominal rates can't go *that* negative, though Europe and Australia have shown us they can go somewhat negative):

real federal funds rate = -4 + .5 (output gap) + .5 (inflation gap)

Therefore, with a 2 percent inflation target, that would warrant a nominal federal funds rate below -2 percent. The only way, mind you, that we can even hit that rate is by pushing short-term nominal rates to zero, or close to zero, and raising inflation expectations to 4 percent.

My point here is that setting interest rates can in fact be mechanical. Personally, I'd much rather the Fed target NGDP and allow interest rates to fluctuate as they will, though that likely won't happen anytime soon.
~ResponsiblyIrresponsible

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ResponsiblyIrresponsible
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5/9/2015 11:31:09 AM
Posted: 1 year ago
Oops, I meant to say that productivity fell 2.1 percent annualized in 2014: 4 (Q4). My bad.
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xoSanchezxo
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5/9/2015 5:23:42 PM
Posted: 1 year ago
Is it possible that the Fed underestimate the annual growth on purpose? The stock markets do react very positive if the Fed announce higher growth than expected.
ResponsiblyIrresponsible
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5/9/2015 5:34:24 PM
Posted: 1 year ago
At 5/9/2015 5:23:42 PM, xoSanchezxo wrote:
Is it possible that the Fed underestimate the annual growth on purpose? The stock markets do react very positive if the Fed announce higher growth than expected.

That would be completely impossible - and, not to mention, deleterious on net.

First, the stock market tends to react positively in response to rising growth expectations. Generally there's no question of that - but, in the context of the SEP, which is put out four times a year with Fed meetings, higher growth forecasts tend to correlate to a closer liftoff (i.e., in March, growth forecasts fell, and the dot plot - the expected path of the policy rate - shifted back, so markets reacted positively because the Fed become more pessimistic, and thus was likely to hold rates at the ZLB for longer). To the contrary, at least now, rising growth forecasts may translate to a closer expected liftoff date, in which case markets would react adversely - stocks would tend to fall, as they did on a global scale following the 2013 Taper Tantrum, when Bernanke hinted at moderating QE purchases.

Second, it would totally undermine the credibility not only of the Fed, but of the individual forecasters. Bullard, Plosser, and Lacker - three relatively hawkish figures - were inflation fearmongers around the time of QE, and were well-known as having the worst forecasting records. To the contrary, Yellen, who's obviously a dove, had the best record. This clearly builds credibility for her side, which is to hold off on raising rates.

But when you suggest that the Fed members itself could possibly be collaborating in order to shift markets, there's just no merit to that. Forecasts differ widely by participants, and usually fluctuate with those participant's views of "optimal policy" - and, clearly, there's a wide divergence of views on the FOMC. Persistently messing up growth forecasts would totally undermine credibility in the Fed's communications and projected policy trajectory, which is rooted in those forecasts being right. If the Fed loses credibility, that has negative ramifications toward any of its policies being effective in the future - expansionary of contractionary measures, which is particularly harmful as it approaches liftoff from the ZLB, which it's never done before.

Case in point, there's far more to Fed policy than pumping up the stock market. That isn't even an intended goal, but a side effect - much like, for instance, moving the dollar's exchange rate. This just wouldn't happen, and even if it did, the harms far outweigh any benefits. The equity wealth effect is volatile and lackluster, and Fed officials know that. The benefits of lifting the stock market just aren't there.
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Chang29
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5/9/2015 7:55:39 PM
Posted: 1 year ago
At 5/9/2015 9:39:22 AM, ResponsiblyIrresponsible wrote:
At 5/9/2015 12:18:35 AM, Chang29 wrote:

Here's the key problem, though - and Ben Bernanke recently quashed the WSJ editorial page when they ran this nonsense (found here: http://www.brookings.edu...):

The Fed has indeed overestimated RGDP growth, BUT they've underestimated employment gains. In other words, RGDP grew slower than expected, but the U3 fell much faster than the expected. That can't be explained in a demand-side model, and clearly speaks to supply-side forces. For instance, productivity fell 1.9 percent annualized in Q1 and 2.1 percent annualized in Q2. Obviously supply-side forces are outside the purview of the Fed - especially a permanent backward shift in the LRAS, as I suspect to be the case, due to persistent headwinds, demographics, and hysteresis.

What do you think caused the backward shift in LRAS?


Here's Bernanke:

"The unemployment rate is a better indicator of cyclical conditions than the economic growth rate, and the relatively rapid decline in unemployment in recent years shows that the critical objective of putting people back to work is being met. Growth in output has been slow, despite solid job creation, because productivity gains have been slow"perhaps as the result of the financial crisis, which hammered new business formation and investment in research and development, perhaps for other reasons. But nobody claims that monetary policy can do much about productivity growth. Where it can be helpful is in supporting the return to full employment, and there the record has been reasonably good. Indeed, it seems clear that the Fed's aggressive actions are an important reason that job creation in the United States has outstripped that of other industrial countries by a wide margin."

[http://www.brookings.edu...]

Using unemployment to measure an economy is a terrible measure. A person's stated reason of employment differs greatly from the real reason. The rate is measured by stated reason, thus useless data.

If you want proof of his last remark, see this WSJ article, which compares the relative performance of the U.S., U.K., Japan, and Europe - the two former of which outperformed the latter two, because they had more expansionary fiscal and monetary policies.

[http://www.wsj.com...]

Finally, once more, the Fed does not *set* interest rates. They set a target range for one rate - a benchmark short-term interbank rate, called the federal funds rate. It actually isn't that hard to set, particularly during normal times when we can just follow a Taylor Rule to the effect of:


nominal federal funds rate = 2 + inflation rate + .5 (output gap) + .5 (inflation gap)

In other words, during normal times we expect the nominal federal funds rate to be around 4 percent - and, mind you, there are different variations of this rule which use the unemployment gap, though they tend to vary with varying measures of unemployment.

Currently, there's research suggesting that the Wicksellian equilibrium - the market-clearing interest rate - is negative and will stay negative. Let's take Robert Hall's 2013 estimate and substitute it into the Taylor Rule for the real federal funds rate (since obviously nominal rates can't go *that* negative, though Europe and Australia have shown us they can go somewhat negative):

real federal funds rate = -4 + .5 (output gap) + .5 (inflation gap)

Therefore, with a 2 percent inflation target, that would warrant a nominal federal funds rate below -2 percent. The only way, mind you, that we can even hit that rate is by pushing short-term nominal rates to zero, or close to zero, and raising inflation expectations to 4 percent.

My point here is that setting interest rates can in fact be mechanical. Personally, I'd much rather the Fed target NGDP and allow interest rates to fluctuate as they will, though that likely won't happen anytime soon.

Interests rate should not be mechanical or require central bank research. Interest rate serve an important economic purpose, coordination between savers and borrowers. A dis-coordination will long term effects on economies, mainly entrepreneurs engaging in long term projects that that appear profitable. The appearance of future profitability is based on current easy money not consumer preferences.

The global savings glut (really should be the called the Chinese saving glut) is not allowed to correct itself due to governmental policies for the benefit of connected political classes on both sides of the Pacific. The tool used is artificial currency exchange rates, set by China with US tacit approval. Fully float the Yuan, interest rates will reach a natural level. Natural interest rates should never be negative.

My local bank, lists exchange rates from about 20 countries on a big board in the waiting area, China is never listed even though millions of Chinese tourists visit the area every year.

The master's of the economy still cannot correctly predict results of their actions. The Fed is trying to predict a change of few basis point in a targeted rate, and can not even get that right. Just get the Fed out of the way.

The Fed should have zero effect on the economy, people through voluntary transactions at agreed to exchange levels is far superior, to artificially targets.
A free market anti-capitalist

If it can be de-centralized, it will be de-centralized.
ResponsiblyIrresponsible
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5/9/2015 8:28:15 PM
Posted: 1 year ago
At 5/9/2015 7:55:39 PM, Chang29 wrote:
What do you think caused the backward shift in LRAS?

Persistent headwinds (elevated credit standards, household deleveraging, etc.), slowing population growth, and hysteresis resulting from the depth of the recession weighing on productivity.

Using unemployment to measure an economy is a terrible measure. A person's stated reason of employment differs greatly from the real reason. The rate is measured by stated reason, thus useless data.

This is just nonsense - there is some structural unemployment, but the "reason" people aren't employed, for the most part, is cyclicality: inability to find a job. There are problems with the U3 unemployment rate that we can discuss, but this isn't one of them.

Interests rate should not be mechanical or require central bank research.

Did you seriously just ignore everything I just said? I just said, outright, that the Fed (a) doesn't set interest rates, but target the Wicksellian equilibrium set by the rate of economic growth and that (b) the FFR shouldn't even be an operating target. If that's your position, then we're on the same page. If you want to posit that demand shocks don't matter and that wage and prices can naturally self-correct, then you're off in looney ville - because that type of attitude is what will accelerate and in fact exacerbate the backward movement in the LRAS.

Interest rate serve an important economic purpose, coordination between savers and borrowers.

No disagreement here.

A dis-coordination will long term effects on economies, mainly entrepreneurs engaging in long term projects that that appear profitable.

No disagreement here - but there are reasons rates could be held down for an extended period, or why the equilibrium real rate over the longer term could be permanently negative: i.e., the rate needed for markets to clear and for investment and savings to equal one another could have permanently declined. We're quite literally targeting that interest rate so as to removing imbalances, though a lot of impediments - namely, the ZLB constraint - are preventing us from doing so.

The appearance of future profitability is based on current easy money not consumer preferences.

A lot wrong here..

(1) Money isn't easy, nor has it been. What's your indicator of that? The base? The FFR? Both are flawed, though we can talk about that.

(2) How far into the future? Markets expect rates to go up, though we don't know how much - and the level at which they will peak at may have declined for the reasons I noted earlier.

The global savings glut (really should be the called the Chinese saving glut) is not allowed to correct itself due to governmental policies for the benefit of connected political classes on both sides of the Pacific.

It's more of a German savings glut, but that isn't entirely wrong - it's mainly because the eurozone countries lack an independent monetary regime and thus are subservient to persistent trade surpluses in Germany, though those may wane as wages in Germany rise, as they are presently.

The tool used is artificial currency exchange rates, set by China with US tacit approval.

That isn't the case with most advanced countries - though China is moving toward that direction, and rightfully so.

Fully float the Yuan, interest rates will reach a natural level. Natural interest rates should never be negative.

Yes, they will and can be negative - and I've explained why, and there's plenty of research to that effect. German bonds, hell, are negative in nominal terms out to a 7-year maturity. Much of that is due to an effective lower bound below zero due to the storage costs of holding cash. Permanent headwinds and demographic changes could in fact permanently drop the Wicksellian below zero.

My local bank, lists exchange rates from about 20 countries on a big board in the waiting area, China is never listed even though millions of Chinese tourists visit the area every year.

Sure, China's policy is direct forex manipulation. I oppose that vehemently.

The master's of the economy still cannot correctly predict results of their actions. The Fed is trying to predict a change of few basis point in a targeted rate, and can not even get that right. Just get the Fed out of the way.

How do you suggest we deal with demand shocks? I just told you I don't want the Fed to set interest rates, but stabilize NGDP. Obviously there's a crucial difference, because under my system, interest rates could in fact gravitate to their equilibrium level and clear markets.

The Fed should have zero effect on the economy, people through voluntary transactions at agreed to exchange levels is far superior, to artificially targets.

Now you're getting into your typical sophistry....
~ResponsiblyIrresponsible

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Chang29
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5/9/2015 10:47:04 PM
Posted: 1 year ago
At 5/9/2015 8:28:15 PM, ResponsiblyIrresponsible wrote:
At 5/9/2015 7:55:39 PM, Chang29 wrote:
What do you think caused the backward shift in LRAS?

Persistent headwinds (elevated credit standards, household deleveraging, etc.), slowing population growth, and hysteresis resulting from the depth of the recession weighing on productivity.

Using unemployment to measure an economy is a terrible measure. A person's stated reason of employment differs greatly from the real reason. The rate is measured by stated reason, thus useless data.

This is just nonsense - there is some structural unemployment, but the "reason" people aren't employed, for the most part, is cyclicality: inability to find a job. There are problems with the U3 unemployment rate that we can discuss, but this isn't one of them.

Not nonsense, stated reasons for employment are to receive governmental incentives. There are more jobs in America, than Americans to fill them. Look at the number of people willing to enter America illegally and work. If a person is willing to work and government does not create an artificially price floor, work can be found, and quickly. Currently in America, all types of unemployment, are due to a person's decisions or governmental policies.


Interests rate should not be mechanical or require central bank research.

Did you seriously just ignore everything I just said? I just said, outright, that the Fed (a) doesn't set interest rates, but target the Wicksellian equilibrium set by the rate of economic growth and that (b) the FFR shouldn't even be an operating target. If that's your position, then we're on the same page. If you want to posit that demand shocks don't matter and that wage and prices can naturally self-correct, then you're off in looney ville - because that type of attitude is what will accelerate and in fact exacerbate the backward movement in the LRAS.

Demand shocks are caused by prior interference of interest rates. The Fed setting a target is interference. You are the resident of Looneyville, believing that demand shocks, just happen, based on nothing. If the prior growth of LRAS was based on bad decisions, then a backward movement is required to correct these poor investments.


Interest rate serve an important economic purpose, coordination between savers and borrowers.

No disagreement here.

A dis-coordination will long term effects on economies, mainly entrepreneurs engaging in long term projects that that appear profitable.

No disagreement here - but there are reasons rates could be held down for an extended period, or why the equilibrium real rate over the longer term could be permanently negative: i.e., the rate needed for markets to clear and for investment and savings to equal one another could have permanently declined. We're quite literally targeting that interest rate so as to removing imbalances, though a lot of impediments - namely, the ZLB constraint - are preventing us from doing so.

The appearance of future profitability is based on current easy money not consumer preferences.

A lot wrong here..

(1) Money isn't easy, nor has it been. What's your indicator of that? The base? The FFR? Both are flawed, though we can talk about that.

(2) How far into the future? Markets expect rates to go up, though we don't know how much - and the level at which they will peak at may have declined for the reasons I noted earlier.

Both points, un-influenced interest rates set prices for any point in the future. Thus, signally entrepreneurs future consumption without demand shocks.


The global savings glut (really should be the called the Chinese saving glut) is not allowed to correct itself due to governmental policies for the benefit of connected political classes on both sides of the Pacific.

It's more of a German savings glut, but that isn't entirely wrong - it's mainly because the eurozone countries lack an independent monetary regime and thus are subservient to persistent trade surpluses in Germany, though those may wane as wages in Germany rise, as they are presently.

Correct, competing currencies, you are coming around.


The tool used is artificial currency exchange rates, set by China with US tacit approval.

That isn't the case with most advanced countries - though China is moving toward that direction, and rightfully so.

Agreed, China is not an advanced country.


Fully float the Yuan, interest rates will reach a natural level. Natural interest rates should never be negative.

Yes, they will and can be negative - and I've explained why, and there's plenty of research to that effect. German bonds, hell, are negative in nominal terms out to a 7-year maturity. Much of that is due to an effective lower bound below zero due to the storage costs of holding cash. Permanent headwinds and demographic changes could in fact permanently drop the Wicksellian below zero.

My local bank, lists exchange rates from about 20 countries on a big board in the waiting area, China is never listed even though millions of Chinese tourists visit the area every year.

Sure, China's policy is direct forex manipulation. I oppose that vehemently.

You oppose it international, yet support the same type of policy domestically. Why is domestically different?


The master's of the economy still cannot correctly predict results of their actions. The Fed is trying to predict a change of few basis point in a targeted rate, and can not even get that right. Just get the Fed out of the way.

How do you suggest we deal with demand shocks? I just told you I don't want the Fed to set interest rates, but stabilize NGDP. Obviously there's a crucial difference, because under my system, interest rates could in fact gravitate to their equilibrium level and clear markets.

Let demand shocks correct themselves. A demand shock occurs because of prior poor investment decisions coordinated by artificially interest rates or debasement of currency, demonstrated by every American downturn, from 1819 to 2008. Entrepreneurs, especially banks, that made poor decision should be financially punished. Prices will adjust to a new corrected level with those that made good financial decisions being rewarded.


The Fed should have zero effect on the economy, people through voluntary transactions at agreed to exchange levels is far superior, to artificially targets.

Now you're getting into your typical sophistry....

Ok, Fair, but what system is better that voluntary exchange?
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5/9/2015 11:29:13 PM
Posted: 1 year ago
At 5/9/2015 10:47:04 PM, Chang29 wrote:
Not nonsense, stated reasons for employment are to receive governmental incentives.

Welfare benefits aren't even close to enough to actually warrant that. Unemployment insurance may create temporary structural unemployment, but those wore off in 2013 - and, mind you, NGDP accelerated. I've seen no evidence that welfare is holding back the LFPR - but, once more, that would only slightly obscure the U3 picture. There's some obscurity due to the decline in the LFPR, but it's leveled out around 62.7 to 62.9 percent, so it's likely that the U3 is giving us a fairly clear indication at this moment.

There are more jobs in America, than Americans to fill them.

I disagree; it's true vacancies are at about a 14-year high, but there are plenty of Americans who aren't able to get a job because they've been long-term unemployed and their skills have atrophied.

Look at the number of people willing to enter America illegally and work.

They usually take jobs most others don't want. I don't deny they exist, though I've seen the numbers cool off - not to mention, this sort of obviates structural uncertainty by circumventing short-term nominal rigidities (their illegal status bids down their wages).

If a person is willing to work and government does not create an artificially price floor, work can be found, and quickly.

You're overestimating wage flexibility; it's far more complex than that, though I oppose wage floors, such as the MW. I fully support, for instance, what Germany did in the early 2000s.

Currently in America, all types of unemployment, are due to a person's decisions or governmental policies.

I agree - though a lot of this is an INDIRECT consequence of government policy, and much is a sin of omission - i.e., overly tight monetary policy breeding high cyclical unemployment, much of which eventually turned structural via hysteresis - rather than a sign of commission.

Demand shocks are caused by prior interference of interest rates.

How is that the case? Show me how the financial crisis was a function of interference in interest rates. That was a result of deregulation and mismanaged financial innovation.

The Fed setting a target is interference. You are the resident of Looneyville, believing that demand shocks, just happen, based on nothing.

I never said it was based on nothing - see above. That's a wonderful strawman, though.

If the prior growth of LRAS was based on bad decisions, then a backward movement is required to correct these poor investments.

When did I say that LRAS grew based on "bad decisions," or even by policy? It doesn't need to grow to move backward, and RGDP growth has been about 3 percent over the past century, so I don't think the IT boom really shifted it much - and, if it did, it shifted back around 2004 or so when the IT gains began to wane.

Both points, un-influenced interest rates set prices for any point in the future. Thus, signally entrepreneurs future consumption without demand shocks.

They don't set prices - they reflect expectations of futures rates, but they move up and down as policy changes and regularly adjust. Not to mention, they're susceptible to shocks - which you just conceded.

Correct, competing currencies, you are coming around.

Germany isn't a matter of competing currencies.. the eurozone countries share a currency, the euro - they lack an independent monetary regime, and Germany pursued wage-flexibility policies which allowed it to enjoy an internal devaluation to run a nearly persistent current account surplus. That was the point I made.

Agreed, China is not an advanced country.

True, but it's modernizing - and it's getting there, particularly with its recent moves to transition to a consumer-based economy in lieu of an export-based economy and to cut back on its rampant currency manipulation, which we both oppose, I presume.

You oppose it international, yet support the same type of policy domestically. Why is domestically different?

It's not possible to support the same policy - buying up foreign currencies to manipulate exchange rates and screw with other countries' exports - domestically. I don't.

Let demand shocks correct themselves.

How? Wages and prices are sticky in the short run - you'd be waiting for ages, and without an independent monetary regime to keep inflation expectations from falling, you have to deal with the paradox of flexibility: expectations fall, actual inflation falls, real rates rise, and consumption and investment fall, ad infinitum as expectations and inflation continue to fall.

A demand shock occurs because of prior poor investment decisions coordinated by artificially interest rates or debasement of currency, demonstrated by every American downturn, from 1819 to 2008.

This is totally untrue, and it is more complex of a debate than we can have in under 8000 characters. It's true that the ultimate debate is over whether recessions result from NGDP shocks or a maladaption of resources. If your view was right, expansionary monetary policy in the form of QE should have caused inflation to explode out of control. But it hasn't. How do you explain that?

Entrepreneurs, especially banks, that made poor decision should be financially punished.

I agree, and that's possible (a) with enough financial regulation, or with breaking them up, so that they don't take down the whole financial system and thus the global economy if the implode due to the excessive moral hazard problem and (b) if the Fed kept NGDP stable.

Prices will adjust to a new corrected level with those that made good financial decisions being rewarded.

I explained earlier why this isn't the case - wage and price stickiness and the paradox of flexibility resulting from the ZLB on nominal interest rates, exacerbated by the absence of an aggressive, independent monetary regime.

Ok, Fair, but what system is better that voluntary exchange?

A system with an independent central bank with the sole mandate of stabilizing NGDP, good supply-side policy, and effective, though not overbearing, regulation of the financial sector so that it doesn't go bust.
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Chang29
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5/10/2015 1:51:46 AM
Posted: 1 year ago
At 5/9/2015 11:29:13 PM, ResponsiblyIrresponsible wrote:
At 5/9/2015 10:47:04 PM, Chang29 wrote:
Welfare benefits aren't even close to enough to actually warrant that. here's some obscurity due to the decline in the LFPR, but it's leveled out around 62.7 to 62.9 percent, so it's likely that the U3 is giving us a fairly clear indication at this moment.

Unemployment in America is voluntary. If a person is willing to work, there is a job. It might pay less, or require relocation but there is more work than people.


I disagree; it's true vacancies are at about a 14-year high, but there are plenty of Americans who aren't able to get a job because they've been long-term unemployed and their skills have atrophied.



They usually take jobs most others don't want. I don't deny they exist, though I've seen the numbers cool off - not to mention, this sort of obviates structural uncertainty by circumventing short-term nominal rigidities (their illegal status bids down their wages).

If a person is willing to work and government does not create an artificially price floor, work can be found, and quickly.

You're overestimating wage flexibility; it's far more complex than that, though I oppose wage floors, such as the MW. I fully support, for instance, what Germany did in the early 2000s.

I am against any wage controls, wages are between a work and the employer.


Currently in America, all types of unemployment, are due to a person's decisions or governmental policies.


How is that the case? Show me how the financial crisis was a function of interference in interest rates. That was a result of deregulation and mismanaged financial innovation.

An idea, after Wednesday May 13th, lets do a debate on the causes of 2008 Financial Crisis. You show the causation of deregulation and mismanaged financial innovation and I'll show artificial interest rates magnified by individuals following laws and regulations as the underlining cause. This will be long, I think two, maybe three rounds, just to explain, one round of rebuttals, and a closing. What do you think?


The Fed setting a target is interference. You are the resident of Looneyville, believing that demand shocks, just happen, based on nothing.

I never said it was based on nothing - see above. That's a wonderful strawman, though.

If the prior growth of LRAS was based on bad decisions, then a backward movement is required to correct these poor investments.

When did I say that LRAS grew based on "bad decisions," or even by policy? It doesn't need to grow to move backward, and RGDP growth has been about 3 percent over the past century, so I don't think the IT boom really shifted it much - and, if it did, it shifted back around 2004 or so when the IT gains began to wane.

I said that, businesses that made poor decisions will fail. It is apart of free markets.




They don't set prices - they reflect expectations of futures rates, but they move up and down as policy changes and regularly adjust. Not to mention, they're susceptible to shocks - which you just conceded.

Correct, competing currencies, you are coming around.

Germany isn't a matter of competing currencies.. the eurozone countries share a currency, the euro - they lack an independent monetary regime, and Germany pursued wage-flexibility policies which allowed it to enjoy an internal devaluation to run a nearly persistent current account surplus. That was the point I made.

Why does currency need geographic boundaries? Why not industry specific?


Agreed, China is not an advanced country.

True, but it's modernizing - and it's getting there, particularly with its recent moves to transition to a consumer-based economy in lieu of an export-based economy and to cut back on its rampant currency manipulation, which we both oppose, I presume.

Any economy the Chinese individuals want, wait Chinese individuals don't get much of a choice. They are forced to follow to guidance of a few wise men.


You oppose it international, yet support the same type of policy domestically. Why is domestically different?

It's not possible to support the same policy - buying up foreign currencies to manipulate exchange rates and screw with other countries' exports - domestically. I don't.

Not what a meant. If a country's current should float in value relative to another country's currency, why should everyone in America be forced into one currency valuation standard?


Let demand shocks correct themselves.

How? Wages and prices are sticky in the short run - you'd be waiting for ages, and without an independent monetary regime to keep inflation expectations from falling, you have to deal with the paradox of flexibility: expectations fall, actual inflation falls, real rates rise, and consumption and investment fall, ad infinitum as expectations and inflation continue to fall.

Wage and prices will correct, along with production and consumption, as you know, that is how economies work. "Sticky", "paradox of _____", and "demand shocks" are the language of sophistry, I thought you were against that.



A demand shock occurs because of prior poor investment decisions coordinated by artificially interest rates or debasement of currency, demonstrated by every American downturn, from 1819 to 2008.

This is totally untrue, and it is more complex of a debate than we can have in under 8000 characters. It's true that the ultimate debate is over whether recessions result from NGDP shocks or a maladaption of resources. If your view was right, expansionary monetary policy in the form of QE should have caused inflation to explode out of control. But it hasn't. How do you explain that?

Which it has, the new currency has caused inflation, just outside of CPI measurements, (US government needs low CPI just to keep entitlement payments low). Look at rising stock prices, rising derivative values, rising real estate prices, at higher rates than CPI something is not right. Then, looking at the resent fall in almost all commodity prices, than means something is not coordinated.


Entrepreneurs, especially banks, that made poor decision should be financially punished.

I agree, and that's possible (a) with enough financial regulation, or with breaking them up, so that they don't take down the whole financial system and thus the global economy if the implode due to the excessive moral hazard problem and (b) if the Fed kept NGDP stable.

A easier way to break up the big banks is to lower barriers to entry (regulation) and end legal tender laws. The big banks with their inferior currency would be forced to change.


Ok, Fair, but what system is better that voluntary exchange?

A system with an independent central bank with the sole mandate of stabilizing NGDP, good supply-side policy, and effective, though not overbearing, regulation of the financial sector so that it doesn't go bust.

Why should people be forced into your ideas of a central bank? I thought you were against sophistry, and for not imposing your ideas.

With multiple currencies, one currency could promote supply side economics, another demand side, another could be deflationary, another inflationary, another whatever, what is wrong with each person selecting a currency that promotes their own values. As argued earlier, superior currencies would be the most sought after.
A free market anti-capitalist

If it can be de-centralized, it will be de-centralized.
ResponsiblyIrresponsible
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5/10/2015 8:37:01 AM
Posted: 1 year ago
At 5/10/2015 1:51:46 AM, Chang29 wrote:

I'll respond to this later, when I'm not extremely busy.
~ResponsiblyIrresponsible

DDO's Economics Messiah