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Reading material for all my fellow econ buffs

ResponsiblyIrresponsible
Posts: 12,398
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5/23/2015 1:38:17 PM
Posted: 1 year ago
I have to read this stuff, so I thought all of you may enjoy it - and, perhaps, this would force me into actually doing the work instead of procrastinating as usual.

Enjoy!

May 22, 2015 speech by FOMC Chair Janet Yellen: http://www.federalreserve.gov...

May 21, 2015 speech by FOMC Vice Chair Stanley Fischer entitled "Past, Present, and Future Challenges for the Euro Area": http://www.federalreserve.gov...

May 20, 2015 speech by FRB Chicago President Charlie Evans entitled "Exercising Caution in Normalizing Monetary Policy": https://www.chicagofed.org...

April FOMC Minutes: http://www.federalreserve.gov...

Miscellaneous WSJ Article on Yellen's speech: http://www.wsj.com...

I suppose later on, if someone other than myself actually pours through this stuff, we could discuss the contents.
~ResponsiblyIrresponsible

DDO's Economics Messiah
ResponsiblyIrresponsible
Posts: 12,398
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5/26/2015 1:43:00 PM
Posted: 1 year ago
Bump... I still haven't finished this material, lmfao. #financeprojectssuck
~ResponsiblyIrresponsible

DDO's Economics Messiah
lannan13
Posts: 23,022
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5/26/2015 4:27:20 PM
Posted: 1 year ago
At 5/26/2015 1:43:00 PM, ResponsiblyIrresponsible wrote:
Bump... I still haven't finished this material, lmfao. #financeprojectssuck

Just keep me in the loop with some of this stuff. I enjoy it.
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If the sky's the limit then why do we have footprints on the Moon? I'm shooting my aspirations for the stars.

"If you are going through hell, keep going." "Sir Winston Churchill

"No one can make you feel inferior without your consent." "Eleanor Roosevelt

Topics I want to debate. (http://tinyurl.com...)
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ResponsiblyIrresponsible
Posts: 12,398
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5/26/2015 4:39:04 PM
Posted: 1 year ago
At 5/26/2015 4:27:20 PM, lannan13 wrote:
At 5/26/2015 1:43:00 PM, ResponsiblyIrresponsible wrote:
Bump... I still haven't finished this material, lmfao. #financeprojectssuck

Just keep me in the loop with some of this stuff. I enjoy it.

Of course.
~ResponsiblyIrresponsible

DDO's Economics Messiah
lannan13
Posts: 23,022
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5/26/2015 4:39:20 PM
Posted: 1 year ago
At 5/26/2015 4:39:04 PM, ResponsiblyIrresponsible wrote:
At 5/26/2015 4:27:20 PM, lannan13 wrote:
At 5/26/2015 1:43:00 PM, ResponsiblyIrresponsible wrote:
Bump... I still haven't finished this material, lmfao. #financeprojectssuck

Just keep me in the loop with some of this stuff. I enjoy it.

Of course.

Thanks.
-~-~-~-~-~-~-~-Lannan13'S SIGNATURE-~-~-~-~-~-~-~-

If the sky's the limit then why do we have footprints on the Moon? I'm shooting my aspirations for the stars.

"If you are going through hell, keep going." "Sir Winston Churchill

"No one can make you feel inferior without your consent." "Eleanor Roosevelt

Topics I want to debate. (http://tinyurl.com...)
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slo1
Posts: 4,314
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5/26/2015 5:46:38 PM
Posted: 1 year ago
At 5/23/2015 1:38:17 PM, ResponsiblyIrresponsible wrote:
I have to read this stuff, so I thought all of you may enjoy it - and, perhaps, this would force me into actually doing the work instead of procrastinating as usual.

Enjoy!

May 22, 2015 speech by FOMC Chair Janet Yellen: http://www.federalreserve.gov...

May 21, 2015 speech by FOMC Vice Chair Stanley Fischer entitled "Past, Present, and Future Challenges for the Euro Area": http://www.federalreserve.gov...

May 20, 2015 speech by FRB Chicago President Charlie Evans entitled "Exercising Caution in Normalizing Monetary Policy": https://www.chicagofed.org...

April FOMC Minutes: http://www.federalreserve.gov...

Miscellaneous WSJ Article on Yellen's speech: http://www.wsj.com...


I suppose later on, if someone other than myself actually pours through this stuff, we could discuss the contents.

The market is not pricing bonds like we are going to see Janet Yellen's prediction of hitting inflation targets.
http://www.bloomberg.com...

It is still an employers market out there and util we see wage inflation due to competition in the jobs arena we will continue to struggle. It is somewhat a chicken before the egg thing. Republican's got it all wrong. They see low taxation and a lack of investment as a driver, but the reality is that there is so much easy money out there to expand big business, but too little money to expand small business. Business is not expanding at the rate of a normal recovery because wages are stagnant and we have a huge underemployment issue.

Janet even said with the decrease in gas households have 4% of increase in disposable income in past year but consumer spending has declined. A very odd combination of metrics and may suggest that went to pay off debt or in savings. Again an increase in money which could be used to expand business but is not because it is a temporary gain just like a one time tax credit.
ResponsiblyIrresponsible
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5/26/2015 8:43:38 PM
Posted: 1 year ago
At 5/26/2015 5:46:38 PM, slo1 wrote:
The market is not pricing bonds like we are going to see Janet Yellen's prediction of hitting inflation targets.
http://www.bloomberg.com...

I just read that article earlier today. This seems to have been a long-running issue of the Fed persistently overstating its ability to lift rates, manifesting itself in a significant (though somewhat narrowing, following revisions in March) gap between SEP projections and fed funds futures.

A great line from that article: "[The Fed] cut their projections in nine of the past 10 meetings and chopped their year-end rate forecasts by at least a half-percentage point from 2015 through 2017."

I think a lot of people recently, after this giant gap became an issue, are jumping on the bandwagon that maybe the Fed has already tightened, which is why markets are in a different place - i.e., they don't think it's plausible to lift rates this year, and certainly not at such a steep trajectory. But I think it's far greater than that: these downward revisions have been ongoing for years. The Fed has been consistently overoptimistic about the economic outlook, in spite of pursuing policies that were far too tight to actually achieve those outcomes. Greg Ip, for instance, had a recent piece in the WSJ on tightening financial conditions from an appreciating dollar - outweighing the virtually nonexistent gains from falling oil prices - constituting a de-facto tightening, but the March FOMC statement and SEP signaled *looser* policy. Market-based expectations actually shifted outward. I predict, at this point, that the Fed will, over the next few months, consistently reduce its projections to those of the market as we continue to see a stream of weak data.

It is still an employers market out there and util we see wage inflation due to competition in the jobs arena we will continue to struggle.

I would challenge this, slightly, by pointing out that there may in fact - and probably is in fact, in certain industries - be a skills mismatch, whereby businesses are willing to higher, but hysteresis amongst the long-term unemployed in particular has raised the "normal" rate of unemployment. But, generally, I agree with this.

It is somewhat a chicken before the egg thing. Republican's got it all wrong. They see low taxation and a lack of investment as a driver, but the reality is that there is so much easy money out there to expand big business, but too little money to expand small business.

A few problems with this. First, the only metric by which money is "easy" is nominal interest rates, though obviously that's a horrid metric. If we wanted to actually go by rates, we'd have to look at real rates relative to the Wicksellian equilibrium real rate, which of course is unobservable. We'd, therefore, want to look at either, per Bernanke, NGDP and inflation, both of which have been significant laggards. And, if we look at market-based assessments of the outlook for policy, as you just pointed out, the Fed's current reaction is actually far too tight.

But that's my main objection. You're right: big businesses are far more capable of raising capital than smaller businesses, and that's because credit standards remain elevated and lending institutions remain preemptively risk averse.

Business is not expanding at the rate of a normal recovery because wages are stagnant and we have a huge underemployment issue.

Underemployment is certainly an issue (and I like that you used underemployment, instead of just unemployment, because obviously this factors in involuntarily part-time employed or even skilled workers who can only find jobs in lesser industries), though stagnant wages are not (well, they are, but I don't think they're causing lack of business expansion, but rather are a byproduct of it). If wages were to rise, obviously the AS would shift left - and we can debate the extent to which that matters, and we'd probably agree that wages could easily rise a few points before there were any material negative employment effects - and ceteris paribus we would see employment decline. If wages were to rise, obviously that's generally a function of a recovering labor market, so obviously we can't reason from a price change, but the main reasons that wages are so low today are (a) labor slack and (b) lackluster productivity, the latter of which is likely part of a longer-term trend. We don't know precisely the causes of that. Fernald and Wang from the San Francisco Fed have a paper suggesting that it's waning IT gains, while Reifschneider, Wilcox, and Wascher believe it's a direct result of the recession. But that, I think, is why wages have remained stagnant.

But, anyway, I think the point you were really trying to hammer was that stagnant wages result in low levels of household consumption, and that I certainly agree with. The story regarding consumption has been astounding as late, because we would tend to think the de-facto tax cut of persistently falling oil prices would make up for some of that slack in wage growth, but instead consumers held onto the money, even as employment growth over the past few months has actually been solid, barring March, and last year obviously was the best year since 1999. Investment, of course, has also been terrible, a lot of which can be attributed to oil-price declines as well.

Janet even said with the decrease in gas households have 4% of increase in disposable income in past year but consumer spending has declined.

I don't think it's declined. In fact, data for the first quarter, if memory serves, showed consumption spending - looking at PCE, obviously - rose about 1.3 percent year-on-year. That number could be slightly off, but it was something like that. It certainly hasn't been negative. I think that would send off far more red flags. But I do agree that the oil price decline never really panned out as planned, in spite of the fact that the White House, the IMF, and the FOMC told us it would be a net gain. I think some research done in 2009 and 2010 by Gauti Eggertsson may be indirectly relevant - falling gas prices reduces inflation, thus raising ex-ante and ex-post real interest rates and to some extent inverting the AD curve. It wouldn't be an issue if AD took off, since the Fed did tell us that these disinflationary effects were transitory - and the same goes, of course, for the impact of the appreciating dollar - but that doesn't seem to have panned out.

A very odd combination of metrics and may suggest that went to pay off debt or in savings.

This could very well be the case. Growth in household liabilities was rather meager in Q1, so it's quite likely that this served roughly the same role as the 2008 payroll tax cut.

Again an increase in money which could be used to expand business but is not because it is a temporary gain just like a one time tax credit.

Agreed.
~ResponsiblyIrresponsible

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slo1
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5/26/2015 9:43:41 PM
Posted: 1 year ago
Interesting metrics.

Corporate profits are at an all time high compared to GDP. Wages are at 60 year low compared to GDP.
http://www.nytimes.com...

I know there are plenty of industries having a challenge finding qualified employees especially in highly specialized roles. It however does not appear to be severe enough to impact profits as a whole.
ResponsiblyIrresponsible
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5/27/2015 5:33:55 PM
Posted: 1 year ago
At 5/26/2015 9:43:41 PM, slo1 wrote:
Interesting metrics.

Corporate profits are at an all time high compared to GDP. Wages are at 60 year low compared to GDP.
http://www.nytimes.com...

Very true. Unfortunately, the Fed can't do much about inequality, though overly tight policy would nevertheless hurt those at the bottom far more than the top, which is why I tend to get so frustrated when people say that QE is nothing more than "bank welfare."

I know there are plenty of industries having a challenge finding qualified employees especially in highly specialized roles. It however does not appear to be severe enough to impact profits as a whole.

This is fair.
~ResponsiblyIrresponsible

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