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Trump will not reappoint Yellen

ResponsiblyIrresponsible
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5/6/2016 4:36:22 AM
Posted: 7 months ago
This really pisses me off:

http://www.marketwatch.com...

"I have nothing against Janet Yellen whatsoever, she"s very capable person. But she"s not a Republican," Trump said. "When her time is up I would most likely replace because of the fact it would be appropriate."

I love that Trump, the supposedly "anti-establishment" candidate -- he's not; he's selling you snake oil -- now refuses to reappoint a person he ADMITS is perfectly competent (far more competent and far more intelligent than him) for... partisan reasons.

Still not convinced, Trump sycophants?

"She is a low interest rate person, she"s always been a low-interest-rate person, and let"s be honest, I"m a low-interest-rate person," Trump added."

No, she is not a "low interest rate" person. Interest rates are an endogenous function of the state of the economy: as the economy improves, interest rates rise. The Fed DOES NOT set interest rates: they nudge the upward and downward with fundamentals. Period, end of story, and Janet Yellen knows that. That's why she's been aggressively talking about interest rate INCREASES (prematurely, might I add).

This is interesting, also, because about six months ago Trump was all in favor of hiking interest rates because of "bubbles" (a ludicrous notion... almost as ludicrous as the idea that tighter money that led to the low interest rates that led to the reaching-for-yield behavior that caused the bubble would do a darned thing to pop it). In fact, he recently spoke out of both sides of his mouth:

http://www.businessinsider.com...

"The problem with low interest rates is it's unfair that people who've led the American way of life"the true American way of life"that have saved every penny, that have paid off their mortgages, that have done everything they were supposed to do, and they were going to retire with their beautiful nest egg, and they were going to get interest on their money, and now they're getting one-eighth of 1%. I think that's unfair to those people, who have led their lives in the way they were supposed to."

Aw, the "low interest rates hurt savers" thing. Where have I heard this before?

Totally wrong: The Fed didn't cause low interest rates, low interest don't mean easy money, they mean tight money. Easier money shifts upward the path of future interest rates, tighter money shifts downward the path of future interest rates. Easier money reduces what savers earn on their accounts in years 1 and 2, but raises them on years 3 through 10. Tight money raises what savers earn on their account in year 1, and maybe some of year 2 if they're lucky, but craters it for years 3 through 10.

I thought this guy was a genius businessman. Like, a smart guy who went to the best schools. / sarcasm

His comments on the perils of a strong dollar are likewise stupid. The Fed's job is stable prices and maximum employment and the two feed off each other, such that perpetually loose monetary policy that attempts to hold the dollar down in perpetuity will undermine full employment.

Isn't it interesting that what he's advocating is akin to the Chinese devaluation story? (Which, by the way, isn't much of a story anymore, because the yuan has been OVERVALUED since 2008, and the Chinese have taken steps to liberalize their financial markets and loosen the constraints on their crawling peg).

He also wrongly insinuates that a strong dollar will hurt growth EVEN IF it's function of a stronger economy, not of overly tight money -- tight money reduces the value of the dollar over time, Donald.

This guy is an unbelievable charlatan, and people who haven't seen this yet never cease to amaze me with their ignorance and stupidity.
~ResponsiblyIrresponsible

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dylancatlow
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5/6/2016 5:20:15 PM
Posted: 7 months ago
I don't understand why you're so obsessed with making the distinction between the Fed "setting" interest rates and "nudging" them around. What arguments are true when the first is assumed but become false when the second is assumed?
ResponsiblyIrresponsible
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5/6/2016 5:55:27 PM
Posted: 7 months ago
At 5/6/2016 5:20:15 PM, dylancatlow wrote:
I don't understand why you're so obsessed with making the distinction between the Fed "setting" interest rates and "nudging" them around. What arguments are true when the first is assumed but become false when the second is assumed?

The key argument that ends up being demonstrably wrong is that "low" interest rates over the past seven years were (a) a result of easy money and (b) that the Fed was willfully continuing this easy-money policy. In reality, they were *forced* to keep rates at zero because the fundamentals they have the power to influence didn't merit anything other than a zero, if not negative, policy rate.

So, let's take an argument Trump raised: low rates hurt savers. The problem, though, is that the Fed isn't the reason interest rates are low (though you could make the case that they're at fault for not doing ENOUGH to merit higher rates); that's predominantly that the state of the economy and a number of secular influences have kept equilibrium rates at negative to zero territory. That isn't the Fed suppressing saving: it's the state of the economy suppressing interest rates.

So here's what that naturally leads to. If the Fed DID control interest rates, and thus was responsible for suppressing savings accounts, then fix it: raise rates back to where they were before they first cut them in September 2007 from 5.25 percent.

What would happen if they did that?

Same thing that happened to the ECB and the BOJ the Swedish Riksbank and virtually every other (there are about a dozen) central banks that tried to raise interest rates after the financial crisis: they had to cut them again, sometimes to an lower (read: negative) level. They didn't have the power to willfully "set" interest rates at a level not dictated by fundamentals.

Here's another. You'll see charlatans, like Peter Schiff, argue out of two sides of their mouth: the economy sucks (not just that the data is wrong, or whatever, though they argue that as well.. but that the data we DO have is indicative of a really weak economy), BUT there's a stock market bubble.

The argument's circular. The Fed cannot permanently increase stock prices, nor can they move them in any direction over any meaningful time horizon not dictated by fundamentals. If stock valuations are "high," it's because interest rates are low. Interest rates are low because of fundamentals because over a one-to-two year horizon the Fed is forced to recalibrate any demonstrable misses -- i.e., reverse a rate hike, cut rates when they should've cut rates, cut rates more aggressively, start buying stuff, etc.

Because discount rates are an input to any discounted cash flow model, stock prices are likewise set by fundamentals -- meaning that an economy which merits a lower interest rate also merits slightly higher valuations, or at the very least that valuations are an expected consequence.
~ResponsiblyIrresponsible

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ResponsiblyIrresponsible
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5/6/2016 10:00:28 PM
Posted: 7 months ago
At 5/6/2016 5:20:15 PM, dylancatlow wrote:

Here's what I was trying to find earlier. It's an explanation from Ben Bernanke that's probably more succinct than mine:

"If the Fed wants to see full employment of capital and labor resources (which, of course, it does), then its task amounts to using its influence over market interest rates to push those rates toward levels consistent with the equilibrium rate, or"more realistically"its best estimate of the equilibrium rate, which is not directly observable. If the Fed were to try to keep market rates persistently too high, relative to the equilibrium rate, the economy would slow (perhaps falling into recession), because capital investments (and other long-lived purchases, like consumer durables) are unattractive when the cost of borrowing set by the Fed exceeds the potential return on those investments. Similarly, if the Fed were to push market rates too low, below the levels consistent with the equilibrium rate, the economy would eventually overheat, leading to inflation"also an unsustainable and undesirable situation. The bottom line is that the state of the economy, not the Fed, ultimately determines the real rate of return attainable by savers and investors. The Fed influences market rates but not in an unconstrained way; if it seeks a healthy economy, then it must try to push market rates toward levels consistent with the underlying equilibrium rate."

I would very, very strongly recommend the entire post. Ben's blog is probably the best thing since sliced bread.

http://www.brookings.edu...
~ResponsiblyIrresponsible

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TrumpTriumph
Posts: 165
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5/7/2016 6:37:58 AM
Posted: 7 months ago
At 5/6/2016 4:36:22 AM, ResponsiblyIrresponsible wrote:
I love that Trump, the supposedly "anti-establishment" candidate -- he's not; he's selling you snake oil -- now refuses to reappoint a person he ADMITS is perfectly competent (far more competent and far more intelligent than him) for... partisan reasons.

I think he'll reappoint her anyways. Literally every pro-establishment thing he's said has been blatant posturing, in an attempt at appealing to the traditional GOP voter base (e.g. abortion, SCOTUS nominations, etc). I don't see why this is any different. All the evidence suggests that he's a political moderate, who really doesn't give a sh1t about what party a person is affiliated with.

I thought this guy was a genius businessman. Like, a smart guy who went to the best schools. / sarcasm

There's a reason why economists run the Fed, rather than the president. It's unreasonable to expect a presidential candidate to have as much knowledge of monetary policy as you.

That said, Trump definitely does have an unfortunate tendency to opine on things he doesn't know much about.
#TrumpTriumph2016
ResponsiblyIrresponsible
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5/7/2016 3:04:54 PM
Posted: 7 months ago
At 5/7/2016 6:37:58 AM, TrumpTriumph wrote:

I think he'll reappoint her anyways. Literally every pro-establishment thing he's said has been blatant posturing, in an attempt at appealing to the traditional GOP voter base (e.g. abortion, SCOTUS nominations, etc). I don't see why this is any different. All the evidence suggests that he's a political moderate, who really doesn't give a sh1t about what party a person is affiliated with.

I just don't get this at all. His "appeal" to you is that he's supposedly anti-establishment, but now you're telling me that you haven't the slightest clue as to what he'll actually do, because for all we know he's selectively pandering -- like when he said that women who get abortions should be punished, only to backtrack a day later.

I just do not understand how in the world you could support just a damned wild card, especially when so much is on the line. We're not talking about HUD secretary, or something: this is the Federal Reserve. There isn't anything more important than the Fed, and he's toying around with this as though it's a political chew toy. It's not: replacing the Fed chair during a damned tightening cycle would be beyond disastrous. It scares me even more to think of who he might appoint -- I mean, who's a "low interest rate guy" who would be acceptable to the GOP senate? Sounds like another Arthur Burns to me (the Fed chair during the 70s largely responsible for the "Great Inflation").

I thought this guy was a genius businessman. Like, a smart guy who went to the best schools. / sarcasm

There's a reason why economists run the Fed, rather than the president. It's unreasonable to expect a presidential candidate to have as much knowledge of monetary policy as you.

I don't. Neither Hillary nor Obama do, either, but they do one thing I haven't seen Trump ever do: they defer! Obama, for instance, reappointed Bernanke, who used to be a registered "Republican" -- but trust me when I say he isn't.... a Republican, for all intents and purposes, lol. We have a tradition in this country of the opposing party reappointing the Fed chair from the past administration -- that's because monetary policy need not be politicized. But Trump WANTS to politicize the Fed: he wants to politicize his choice for chair, he wants to politicize monetary policy decisions by subjecting the Fed to a disgusting audit, and the list goes on and on.

That said, Trump definitely does have an unfortunate tendency to opine on things he doesn't know much about.

I couldn't have said this better myself.... and yet I'm voting for Clinton. What's your excuse? Lol.
~ResponsiblyIrresponsible

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TrumpTriumph
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5/7/2016 4:03:38 PM
Posted: 7 months ago
At 5/7/2016 3:04:54 PM, ResponsiblyIrresponsible wrote:
I just don't get this at all. His "appeal" to you is that he's supposedly anti-establishment, but now you're telling me that you haven't the slightest clue as to what he'll actually do, because for all we know he's selectively pandering

Recognizing that he's selectively pandering on some issues is not mutually exclusive with having a general idea of what he's actually going to do. Anti-Trumpers like to call Trump a "wild card," but that's simply not the case -- just like any politician, Trump engages in voter appeasement, but that doesn't mean it's impossible to reasonably predict what a Trump presidency would be like.

That said, Trump definitely does have an unfortunate tendency to opine on things he doesn't know much about.
I couldn't have said this better myself.... and yet I'm voting for Clinton. What's your excuse? Lol.

I'm okay with him publicly pretending to know more than he actually knows, as long as doesn't act upon that pretense on the job.
#TrumpTriumph2016
ResponsiblyIrresponsible
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5/7/2016 4:13:18 PM
Posted: 7 months ago
At 5/7/2016 4:03:38 PM, TrumpTriumph wrote:
Recognizing that he's selectively pandering on some issues is not mutually exclusive with having a general idea of what he's actually going to do.

But how could you have a general idea? I do not see how those two aren't mutually exclusive in practice.

Like, Donald Trump is and has always been unpredictable, and he prides himself on it. How do YOU know when he's pandering versus being serious, and are you really willing to hang your hat on that ability to distinguish truth from fiction, especially when someone of his ideas -- deporting 11 million people, banning all Muslims, refusing to reappoint one of the most competent Fed chairs we've ever had, etc. -- are so incredibly dangerous?

Anti-Trumpers like to call Trump a "wild card," but that's simply not the case -- just like any politician, Trump engages in voter appeasement, but that doesn't mean it's impossible to reasonably predict what a Trump presidency would be like.

I don't understand..... you just said that he isn't a wild card, but then gave me a textbook definition of a wild card: no one can reasonably predict what a Trump presidency would be like. Is that not the DEFINITION of wild card?

I also wouldn't call this run-of-the-mill voter appeasement like, say, Hillary Clinton does. I can tell you what Hillary will do if elected: she'll continue Obama's policies and probably be a bit more hawkish on the Middle East, for better or for worse. She's pretty easy to pin down because of her extensive public profile. Trump? I doubt he even knows the difference between Sunni and Shiite -- just ban them all!

That said, Trump definitely does have an unfortunate tendency to opine on things he doesn't know much about.

I couldn't have said this better myself.... and yet I'm voting for Clinton. What's your excuse? Lol.

I'm okay with him publicly pretending to know more than he actually knows, as long as doesn't act upon that pretense on the job.

What could he act on as president, if not on a pretense of knowledge? To make policy, he needs to act on SOMETHING... if he knows nothing, he's acting on that nothingness.
~ResponsiblyIrresponsible

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TrumpTriumph
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5/7/2016 4:31:45 PM
Posted: 7 months ago
At 5/7/2016 4:13:18 PM, ResponsiblyIrresponsible wrote:
But how could you have a general idea? I do not see how those two aren't mutually exclusive in practice.
Like, Donald Trump is and has always been unpredictable, and he prides himself on it. How do YOU know when he's pandering versus being serious,

Because it's obvious...

and are you really willing to hang your hat on that ability to distinguish truth from fiction, especially when someone of his ideas -- deporting 11 million people, banning all Muslims, refusing to reappoint one of the most competent Fed chairs we've ever had, etc. -- are so incredibly dangerous?

Yes. Because I know that he's a highly intelligent person, who has good intentions, is a political moderate, and is willing to accept the advice of people who know more than he does. Your negative opinion of him is based solely upon the public persona he projects, which is crafted exclusively for the sake of mass-appeal. But like with any public figure, you have to look beyond that to know what he's really like. I've done my research, which is why I'm reasonably confident in my perceptions of him.

I don't understand..... you just said that he isn't a wild card, but then gave me a textbook definition of a wild card: no one can reasonably predict what a Trump presidency would be like. Is that not the DEFINITION of wild card?

You misread. I said it's not impossible to predict what a Trump presidency would be like.

I'm okay with him publicly pretending to know more than he actually knows, as long as doesn't act upon that pretense on the job.
What could he act on as president, if not on a pretense of knowledge? To make policy, he needs to act on SOMETHING... if he knows nothing, he's acting on that nothingness.

Like any other POTUS, he'd be acting on the advise of specialized experts [https://en.wikipedia.org...]. Being POTUS doesn't really require a lot of expertise -- the only skills the position really calls for are (1) quickly learning & applying information, and (2) communicating effectively, both to the public and to other people in power.
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ResponsiblyIrresponsible
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5/7/2016 4:42:20 PM
Posted: 7 months ago
At 5/7/2016 4:31:45 PM, TrumpTriumph wrote:
At 5/7/2016 4:13:18 PM, ResponsiblyIrresponsible wrote:
But how could you have a general idea? I do not see how those two aren't mutually exclusive in practice.
Like, Donald Trump is and has always been unpredictable, and he prides himself on it. How do YOU know when he's pandering versus being serious,

Because it's obvious...

How? It seems incredibly ad-hoc.

Like, really, can you share with me this secret Trump code you use to sort his actual positions from his fictional ones? I'd be really, really interested in it!

and are you really willing to hang your hat on that ability to distinguish truth from fiction, especially when someone of his ideas -- deporting 11 million people, banning all Muslims, refusing to reappoint one of the most competent Fed chairs we've ever had, etc. -- are so incredibly dangerous?

Yes. Because I know that he's a highly intelligent person,

Evidence?

who has good intentions,

Sure, I think all candidates generally do.... doesn't mean that he has the means to carry out those intentions.

is a political moderate,

Lol, not even close.

and is willing to accept the advice of people who know more than he does.

Where?

If so, he and I should talk. I'd love to save Janet's job.

Your negative opinion of him is based solely upon the public persona he projects, which is crafted exclusively for the sake of mass-appeal.

No, it isn't. It's based on my assessment of the POLICY IDEAS he's put forward, which match his public persona in terms of know-nothingness. If I thought for a second he knew what he was doing, and were being intentionally misleading (Romney/Gingrich were famous for this), my narrative would be quite different. But I genuinely think he has no freaking clue what he's doing, and your jump to his defense which attempts to discredit with my broad brush any genuine concerns over his candidacy, isn't doing him any real favors.

But like with any public figure, you have to look beyond that to know what he's really like. I've done my research, which is why I'm reasonably confident in my perceptions of him.

Look beyond.... what? His tax plan which would add something like 10 trillion to the national debt over a decade -- which he ACTUALLY thinks we need to pay down? The fact that he wants bondholders to take a haircut, which is effectively threatening to default and will send global bond yields absolutely soaring? (This isn't a business: you don't ask your shareholders to take a cut because you're downsizing. Our ability to borrow is predicated on the ability to pay back our debts IN FULL.)

I think you're giving the guy wayyyyy too much credit and attributing to him qualities he clearly lacks. If I were to discredit your support for him with a broad brush -- and I won't, but if I did -- I'd say it's because of his "anti establishment" persona (though he's nothing of the sort in reality).

I don't understand..... you just said that he isn't a wild card, but then gave me a textbook definition of a wild card: no one can reasonably predict what a Trump presidency would be like. Is that not the DEFINITION of wild card?

You misread. I said it's not impossible to predict what a Trump presidency would be like.

I didn't misread. You said he's NOT a wild card, which should mean that no one can predict what his presidency would be like. But then you're telling me it's not impossible. Which is it?

I'm okay with him publicly pretending to know more than he actually knows, as long as doesn't act upon that pretense on the job.
What could he act on as president, if not on a pretense of knowledge? To make policy, he needs to act on SOMETHING... if he knows nothing, he's acting on that nothingness.

Like any other POTUS, he'd be acting on the advise of specialized experts [https://en.wikipedia.org...]. Being POTUS doesn't really require a lot of expertise -- the only skills the position really calls for are (1) quickly learning & applying information, and (2) communicating effectively, both to the public and to other people in power.

I don't think he can do either (1) or (2), but the whole "well, he's a dumbars, so he'll focus on expert advice" is a non-unique point: we could elect Donald Duck on the promise that he'd defer to experts, and I'd probably prefer him because he isn't as racist. If anyone can do the job with the help of "experts" -- and the "experts" they surround themselves with obviously are a function of the candidate's acumen (i.e., his foreign policy team has been called a "joke," he gets his foreign policy advice "from the shows," Andrew Napolitano is his first nomination to the Supreme Court, he's mentioned John Bolton as a foreign policy advisor, when Bolton was instrumental in us going into Iraq, etc.) -- then why Trump? Why not Hillary or literally anyone else? Find me some unique benefits to a Trump presidency.
~ResponsiblyIrresponsible

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tejretics
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5/8/2016 3:44:18 AM
Posted: 7 months ago
At 5/7/2016 4:42:20 PM, ResponsiblyIrresponsible wrote:
Sure, I think all candidates generally do...

...except Ted Cruz.

Lol, not even close.

Why? He's pro-abortion, pro-gay marriage, pro-minimum wage, he's okay with tax hikes, et cetera. He's also partially conservative (e.g. con-minimum wage hike, pro-torture, pro-death penalty). I think -- by U.S. standards (which are, for the record, extremely conservative) -- he qualifies as a "moderate." In the UK, he'd be in the political right.
"Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe." - Frederick Douglass
ResponsiblyIrresponsible
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5/8/2016 3:56:09 AM
Posted: 7 months ago
At 5/8/2016 3:44:18 AM, tejretics wrote:
At 5/7/2016 4:42:20 PM, ResponsiblyIrresponsible wrote:
Sure, I think all candidates generally do...

...except Ted Cruz.

He probably thinks he means well He's just a loony bird.

Lol, not even close.

Why? He's pro-abortion, pro-gay marriage, pro-minimum wage, he's okay with tax hikes, et cetera.

He doesn't know where he stands on abortion: he just said women should be punished for having abortions.

Not long ago he said he's not for gay marriage.

He also said wages are TOO HIGH because of global competitiveness, even though most MW jobs are non-exportable.

His tax plan -- which cuts taxes -- adds a projected $10 trillion to the debt over the next decade.

He wants to deport 11 million people; threatened to DEFAULT on the US debt; supports torture "even if it doesn't work"; wants to ban an entire religion from entering the country; wants to kill the FAMILIES of ISIS (i.e., civilians), and it just goes on and on.

He's no moderate.

He's also partially conservative (e.g. con-minimum wage hike, pro-torture, pro-death penalty).

I don't think he knows what he believes.

I think -- by U.S. standards (which are, for the record, extremely conservative) -- he qualifies as a "moderate." In the UK, he'd be in the political right.

I think that's totally wrong for the reasons stated above.
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tejretics
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5/8/2016 4:02:05 AM
Posted: 7 months ago
At 5/8/2016 3:56:09 AM, ResponsiblyIrresponsible wrote:
He probably thinks he means well. He's just a loony bird.

No. He's doing it all in his own self-interest.

He doesn't know where he stands on abortion: he just said women should be punished for having abortions.

He said, "If abortion were to be made illegal, women would be punished for having abortions." His position has been "I personally oppose it, but it should remain legal."

Not long ago he said he's not for gay marriage.

"I personally oppose it, but it should be legal," has been his position here as well.

He also said wages are TOO HIGH because of global competitiveness, even though most MW jobs are non-exportable.

The MW is clearly one of the issues where he said "I don't support it" to get GOP voters, and actually supports it. And this isn't via some "secret code": he officially declared support for a minimum wage recently (https://www.yahoo.com...).

His tax plan -- which cuts taxes -- adds a projected $10 trillion to the debt over the next decade.

Okay. I didn't know that.

He wants to deport 11 million people; threatened to DEFAULT on the US debt; supports torture "even if it doesn't work"; wants to ban an entire religion from entering the country; wants to kill the FAMILIES of ISIS (i.e., civilians), and it just goes on and on.

The "mass deportation" and "Muslim ban" can't be accomplished. I agree that his position on torture is absurd and conservative -- doesn't stop him from being "moderate."
"Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe." - Frederick Douglass
ResponsiblyIrresponsible
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5/8/2016 4:12:13 AM
Posted: 7 months ago
At 5/8/2016 4:02:05 AM, tejretics wrote:
At 5/8/2016 3:56:09 AM, ResponsiblyIrresponsible wrote:
He probably thinks he means well. He's just a loony bird.

No. He's doing it all in his own self-interest.

I doubt it. There's probably more to gain for being a loud-mouthed senator, or even selling his soul to industry.

He doesn't know where he stands on abortion: he just said women should be punished for having abortions.

He said, "If abortion were to be made illegal, women would be punished for having abortions." His position has been "I personally oppose it, but it should remain legal."

That's not what he's said in the past -- again, a sign that he doesn't know what he believes.

Not long ago he said he's not for gay marriage.

"I personally oppose it, but it should be legal," has been his position here as well.

Again, same as above.

He also said wages are TOO HIGH because of global competitiveness, even though most MW jobs are non-exportable.

The MW is clearly one of the issues where he said "I don't support it" to get GOP voters, and actually supports it. And this isn't via some "secret code": he officially declared support for a minimum wage recently (https://www.yahoo.com...).

And he officially said wages are too high -- he said that on Morning Joe when directly asked about the MW, and then he flip-flopped. He changes his mind so often it's virtually impossible to know where he actually stands.

His tax plan -- which cuts taxes -- adds a projected $10 trillion to the debt over the next decade.

Okay. I didn't know that.

Mhmm. But you're right that he suggested he might be willing to raise taxes on hedgies -- cognitive dissonance at worst, pandering at best.

He wants to deport 11 million people; threatened to DEFAULT on the US debt; supports torture "even if it doesn't work"; wants to ban an entire religion from entering the country; wants to kill the FAMILIES of ISIS (i.e., civilians), and it just goes on and on.

The "mass deportation" and "Muslim ban" can't be accomplished.

I agree... which is why it's even more scary that he wants to do it, much less get it rolling in his first 100 days.

I agree that his position on torture is absurd and conservative -- doesn't stop him from being "moderate."

That and a whole lot of other things stops him from being "moderate." Torture is a violation of the Geneva Conventions. His response? "The Geneva Conventions are a problem!"

Supporting torture, wanting to deport 11 million people and ban an entire religion, literally advocating for killing civilians in Syria, wanting to default on the US debt, etc. make him an extremist.
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ResponsiblyIrresponsible
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5/8/2016 4:19:24 AM
Posted: 7 months ago
At 5/8/2016 4:02:05 AM, tejretics wrote:

Not to mention, his plan re: the Fed would probably sow the seeds of another "Great Inflation." Sounds apocalyptic, but it's what happened the last time we politicized monetary policy.
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dylancatlow
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5/9/2016 5:45:50 PM
Posted: 7 months ago
At 5/6/2016 5:55:27 PM, ResponsiblyIrresponsible wrote:
At 5/6/2016 5:20:15 PM, dylancatlow wrote:
I don't understand why you're so obsessed with making the distinction between the Fed "setting" interest rates and "nudging" them around. What arguments are true when the first is assumed but become false when the second is assumed?

The key argument that ends up being demonstrably wrong is that "low" interest rates over the past seven years were (a) a result of easy money and (b) that the Fed was willfully continuing this easy-money policy. In reality, they were *forced* to keep rates at zero because the fundamentals they have the power to influence didn't merit anything other than a zero, if not negative, policy rate.

So, let's take an argument Trump raised: low rates hurt savers. The problem, though, is that the Fed isn't the reason interest rates are low (though you could make the case that they're at fault for not doing ENOUGH to merit higher rates); that's predominantly that the state of the economy and a number of secular influences have kept equilibrium rates at negative to zero territory. That isn't the Fed suppressing saving: it's the state of the economy suppressing interest rates.

So here's what that naturally leads to. If the Fed DID control interest rates, and thus was responsible for suppressing savings accounts, then fix it: raise rates back to where they were before they first cut them in September 2007 from 5.25 percent.

What would happen if they did that?

Same thing that happened to the ECB and the BOJ the Swedish Riksbank and virtually every other (there are about a dozen) central banks that tried to raise interest rates after the financial crisis: they had to cut them again, sometimes to an lower (read: negative) level. They didn't have the power to willfully "set" interest rates at a level not dictated by fundamentals.

Here's another. You'll see charlatans, like Peter Schiff, argue out of two sides of their mouth: the economy sucks (not just that the data is wrong, or whatever, though they argue that as well.. but that the data we DO have is indicative of a really weak economy), BUT there's a stock market bubble.

The argument's circular. The Fed cannot permanently increase stock prices, nor can they move them in any direction over any meaningful time horizon not dictated by fundamentals. If stock valuations are "high," it's because interest rates are low. Interest rates are low because of fundamentals because over a one-to-two year horizon the Fed is forced to recalibrate any demonstrable misses -- i.e., reverse a rate hike, cut rates when they should've cut rates, cut rates more aggressively, start buying stuff, etc.

Because discount rates are an input to any discounted cash flow model, stock prices are likewise set by fundamentals -- meaning that an economy which merits a lower interest rate also merits slightly higher valuations, or at the very least that valuations are an expected consequence.

I don't understand. Doesn't the Fed have the ability to make money more available than it would otherwise be by essentially creating money out of thin air and then loaning it out to banks? Obviously the Fed can't force banks to lend more cheaply, but they can increase the money supply which has the effect of lowering interest rates, and the reason they do this is to promote spending and stimulate the economy when it's depressed...it's essentially a means of "short-circuiting" the vicious cycle associated with a depressed economy. And when interest rates can go no lower don't they often just go out onto the market and buy assets directly in order to boost demand? So sure, the state of the economy is in a sense "responsible" for low interest rates, but that's partially because the state of the economy determines how the Fed will set its policy. The Fed is not technically "forced" to keep rates at zero, it's just what's required to keep the economy from slipping further into depression. I'm not arguing that the Fed is wrong in doing this.

You say that when the central banks of various countries tried to set the interest rate above the level dictated by the market they had to revert back to the original rate (presumably because it brought about economic troubles). This doesn't prove that the interest rate is not under the Fed's control, merely that the Fed can't expect to set the rate at whatever level it wants and expect the market to do well, a fact that's disputed by no one.

As for Peter Schiff's claim that the economy is both in a bad state and experiencing a stock market bubble, I can't pass judgement unless I knew exactly what he meant by "sucks". I mean, if he's just claiming that the economy sucks but will suck even more once the bubble bursts, I see nothing contradictory about that.
ResponsiblyIrresponsible
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5/9/2016 6:03:40 PM
Posted: 7 months ago
At 5/9/2016 5:45:50 PM, dylancatlow wrote:
I don't understand. Doesn't the Fed have the ability to make money more available than it would otherwise be by essentially creating money out of thin air and then loaning it out to banks?

Sort of, though the transmission doesn't always work as planned.

Obviously the Fed can't force banks to lend more cheaply, but they can increase the money supply which has the effect of lowering interest rates, and the reason they do this is to promote spending and stimulate the economy when it's depressed...it's essentially a means of "short-circuiting" the vicious cycle associated with a depressed economy.

This is true.

And when interest rates can go no lower don't they often just go out onto the market and buy assets directly in order to boost demand?

Yes.

So sure, the state of the economy is in a sense "responsible" for low interest rates, but that's partially because the state of the economy determines how the Fed will set its policy. The Fed is not technically "forced" to keep rates at zero, it's just what's required to keep the economy from slipping further into depression. I'm not arguing that the Fed is wrong in doing this.

Everything you said is right, lol. I mean, I guess they're not "forced" in the sense that they could keep interest rates "too high" and let the economy go to total crap. They have more control over short rates than long rates, so you might see long rates move downward, but if the Fed just didn't give a scintilla of a hell and kept contracting, long rates would probably move upward as well.

I guess by "forced" I mean that they're effectively compelled, consistent with their mandate, to move interest rates up and down consistent with fundamentals. Because they have such a large influence over the state of the economy and at least in theory are responsible for the outcomes they observe, the implication is that they're willfully missing
-- and thus are "forced" to backtrack in order to prevent themselves from losing all credibility.

To explain that a bit more, let's model fundamentals with a basic Taylor rule (too simplistic, but it gets the point across: even think of it as a shadow rate, so we factor into balance sheet manipulation, forward guidance, etc.)

r(t) = alpha (r*(t) + 0.5(u - un) + 0.5(pi - pi*)) + (1 - alpha) r (t-1)

So the current fed funds rate is a function of a smoothing parameter times a Taylor rule output with a time-varying equilibrium rate and equal weighs on unemployment and inflation and a lagged fed funds rate times an inertial coefficient. That's how most people believe, in a nutshell, that the Fed sets policy. But what if there's endogeneity? I.e., the right side of the equation affects the left side of the equation, BUT the left side also affects the left?

In other words, the unemployment gap and the inflation gap might be endogeneous functions of each other and of the fed funds rate. So what you're saying is correct: they do influence interest rates and that should have implications for the fundamentals, but the actual and expected path of those fundamentals (that they control) influence the path of the future policy rate. So if they allow, willfully or not, the fundamentals to crumble, they can't realistically tighten policy.

You say that when the central banks of various countries tried to set the interest rate above the level dictated by the market they had to revert back to the original rate (presumably because it brought about economic troubles).

Not necessarily "dictated by the market" as much as dictated by fundamentals. They probably overestimated the state of the economy or the level of the equilibrium rate -- or, like the Swedish Riksbank for instance, were worried about frothy financial markets.

This doesn't prove that the interest rate is not under the Fed's control, merely that the Fed can't expect to set the rate at whatever level it wants and expect the market to do well, a fact that's disputed by no one.

I mean, it depends on how granular you want to get, lol. I mean, sure, the Fed sets a target for the fed funds rate, and we tend to think they can hit that target with ease because of their control over the money supply -- in some cases they can, and in others they can't (i.e., the actual fed funds rate was actually much lower than what fundamentals would have dictated in late 2008).

But what I'm saying is they don't "set" the fed funds rate as some sort of autonomous agent. It's not like Janet walks outside on her porch every meeting and if she sees her shadow, she keeps the fed funds rate at 1/4 to 1/2 percent. The fed funds rate is an endogenous function of the state of the economy which in some sense they can influence, but in a significant sense is buffeted by unforeseen shocks. Most MP curves you might see in an intermediate macro course might have an "r-bar" term (autonomous policy changes) in which the central bank varies the fed funds rate beyond what fundamentals might dictate -- maybe they're worried about frothy markets, forecast error, residual weakness not captured in the existent reaction function, etc. -- but for the most part it's a function of fundamentals.

So I think this really boils down to a technicality, lol. Sure, the central bank COULD say tomorrow "screw the markets, we're doing X," but they won't. If the data sucks, they pretty much have to keep rates where they are, notwithstanding how much they really, really want to do otherwise.

As for Peter Schiff's claim that the economy is both in a bad state and experiencing a stock market bubble, I can't pass judgement unless I knew exactly what he meant by "sucks". I mean, if he's just claiming that the economy sucks but will suck even more once the bubble bursts, I see nothing contradictory about that.

If there's actually a bubble, that means stocks are mispriced -- i.e., they should be lower. That means interest rates should be higher, which means the equilibrium rate is higher. Once the bubble bursts, the equilibrium rate falls because growth was held up not by strong fundamentals, but by a bubble, so the economy will get exceedingly worse. The key contradiction is in saying, "Hey, the economy is better than the Fed thinks, so higher interest rates are necessary given this current data." There's the contradiction: he says the data sucks so much that LOWER or negative rates would be needed, which would imply even HIGHER valuations.
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slo1
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5/9/2016 9:39:29 PM
Posted: 7 months ago
At 5/8/2016 4:19:24 AM, ResponsiblyIrresponsible wrote:
At 5/8/2016 4:02:05 AM, tejretics wrote:

Not to mention, his plan re: the Fed would probably sow the seeds of another "Great Inflation." Sounds apocalyptic, but it's what happened the last time we politicized monetary policy.

Check out his statement on the US can't default on its debt because it can just print money. lol

He doesn't seem to have the ability to understand nuance. Yes, we could print $20 trillion to pay off the treasuries, but gee that $5,000 loaf of bread will get no jelly with it because that is $10,000.
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5/9/2016 10:02:37 PM
Posted: 7 months ago
At 5/9/2016 9:39:29 PM, slo1 wrote:
At 5/8/2016 4:19:24 AM, ResponsiblyIrresponsible wrote:
At 5/8/2016 4:02:05 AM, tejretics wrote:

Not to mention, his plan re: the Fed would probably sow the seeds of another "Great Inflation." Sounds apocalyptic, but it's what happened the last time we politicized monetary policy.

Check out his statement on the US can't default on its debt because it can just print money. lol

Yup!

To an extent, he's correct that the US government could only willfully default on its debt (e.g., Russia in the late 90s) because we issue our own currency, but then that completely chips away at the "haircut" narrative, because in order to actually extract meaningful concessions from bondholders, he'd have to threaten to hit the red button... then the spike in default risk (result of the realization that the president is a loony bird) offsets any of the possible gains from the haircut.

He doesn't seem to have the ability to understand nuance. Yes, we could print $20 trillion to pay off the treasuries, but gee that $5,000 loaf of bread will get no jelly with it because that is $10,000.

Precisely. He also thinks we need to "pay off" 18 trillion or however much we owe, as though (a) we ever are physically paying off that amount on debt with the same maturities, rather than rolling over past debts or (b) that we don't owe most of that debt to ourselves in the form of, say, surplus payroll tax revenue.

His ignorance is just unbelievably astounding, and I don't understand how any intelligent person could buy into it.
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ResponsiblyIrresponsible
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5/9/2016 10:07:02 PM
Posted: 7 months ago
Also, sorry, Dylan, I misspoke earlier. I meant to say that the actual fed funds rate -- the effective funds rate, or the average overnight rate -- was lower than what the Fed was targeting at the time, which was 2 percent.
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twocupcakes
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5/13/2016 1:21:35 AM
Posted: 6 months ago
At 5/6/2016 4:36:22 AM, ResponsiblyIrresponsible wrote:
This really pisses me off:

http://www.marketwatch.com...

"I have nothing against Janet Yellen whatsoever, she"s very capable person. But she"s not a Republican," Trump said. "When her time is up I would most likely replace because of the fact it would be appropriate."

I love that Trump, the supposedly "anti-establishment" candidate -- he's not; he's selling you snake oil -- now refuses to reappoint a person he ADMITS is perfectly competent (far more competent and far more intelligent than him) for... partisan reasons.

Still not convinced, Trump sycophants?

"She is a low interest rate person, she"s always been a low-interest-rate person, and let"s be honest, I"m a low-interest-rate person," Trump added."

No, she is not a "low interest rate" person. Interest rates are an endogenous function of the state of the economy: as the economy improves, interest rates rise. The Fed DOES NOT set interest rates: they nudge the upward and downward with fundamentals. Period, end of story, and Janet Yellen knows that. That's why she's been aggressively talking about interest rate INCREASES (prematurely, might I add).

This is interesting, also, because about six months ago Trump was all in favor of hiking interest rates because of "bubbles" (a ludicrous notion... almost as ludicrous as the idea that tighter money that led to the low interest rates that led to the reaching-for-yield behavior that caused the bubble would do a darned thing to pop it). In fact, he recently spoke out of both sides of his mouth:

http://www.businessinsider.com...

"The problem with low interest rates is it's unfair that people who've led the American way of life"the true American way of life"that have saved every penny, that have paid off their mortgages, that have done everything they were supposed to do, and they were going to retire with their beautiful nest egg, and they were going to get interest on their money, and now they're getting one-eighth of 1%. I think that's unfair to those people, who have led their lives in the way they were supposed to."

Aw, the "low interest rates hurt savers" thing. Where have I heard this before?

Totally wrong: The Fed didn't cause low interest rates, low interest don't mean easy money, they mean tight money. Easier money shifts upward the path of future interest rates, tighter money shifts downward the path of future interest rates. Easier money reduces what savers earn on their accounts in years 1 and 2, but raises them on years 3 through 10. Tight money raises what savers earn on their account in year 1, and maybe some of year 2 if they're lucky, but craters it for years 3 through 10.

I thought this guy was a genius businessman. Like, a smart guy who went to the best schools. / sarcasm

His comments on the perils of a strong dollar are likewise stupid. The Fed's job is stable prices and maximum employment and the two feed off each other, such that perpetually loose monetary policy that attempts to hold the dollar down in perpetuity will undermine full employment.

Isn't it interesting that what he's advocating is akin to the Chinese devaluation story? (Which, by the way, isn't much of a story anymore, because the yuan has been OVERVALUED since 2008, and the Chinese have taken steps to liberalize their financial markets and loosen the constraints on their crawling peg).

He also wrongly insinuates that a strong dollar will hurt growth EVEN IF it's function of a stronger economy, not of overly tight money -- tight money reduces the value of the dollar over time, Donald.

This guy is an unbelievable charlatan, and people who haven't seen this yet never cease to amaze me with their ignorance and stupidity.

Yeah, Trump is extremely stupid. It is scary/hilarious that some people actually vote for him. Trump is probably stupider than I thin he is, and I think he is stupid.