tag:blogger.com,1999:blog-6616959642391988608.post3415717546497849029..comments2024-03-28T00:18:25.641-07:00Comments on Calafia Beach Pundit: Jobs growth is up, and the Fed needs to moveScott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger19125tag:blogger.com,1999:blog-6616959642391988608.post-81531774269951374632015-02-10T11:36:33.446-08:002015-02-10T11:36:33.446-08:00"So why is the Fed keeping short-term interes..."So why is the Fed keeping short-term interest rates at zero? That's a good question, and there is only one reasonable answer: because the market is still very worried that the good times won't last."<br /><br />While this quote refers<br /> to markets broadly, I think the Fed is fundamentally concerned about keeping the stock market up for its believed wealth effect, and fears Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-25508131257646578592015-02-10T08:04:55.575-08:002015-02-10T08:04:55.575-08:00Re Larry Summers: He believes the Fed should not r...Re Larry Summers: He believes the Fed should not raise rates until it is clear that inflation is about to rise above 2%. He prefers the Fed err on the side of inflation, because he believes that deflation is a black hole that will swallow the economy. I don't share that belief. I believe that the best monetary policy is one that delivers low and stable inflation, no matter what. I believe Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-20856556785728457462015-02-10T05:44:17.275-08:002015-02-10T05:44:17.275-08:00"Gold is still trading at levels that are rou..."Gold is still trading at levels that are roughly twice the inflation-adjusted average price of gold over the past century, and that suggests a substantial over-supply of dollars."--Grannis.<br /><br />This one bothers me a little. I sense gold prices now are set in China and India--certainly, by volume, that is by far the largest market for gold. <br /><br />If 1.2 billion Indians and Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-30019319812934511492015-02-09T21:49:31.495-08:002015-02-09T21:49:31.495-08:00Scott,
Larry Summers, as you probably have seen, ...Scott,<br /><br />Larry Summers, as you probably have seen, has a different view than yours. Would be great to hear your thoughts on this.<br /><br />Thanks.Royhttps://www.blogger.com/profile/09325498485905547125noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-83303433710881249082015-02-09T16:52:09.768-08:002015-02-09T16:52:09.768-08:00Check out Dr. Copper. A good time to tighten monet...Check out Dr. Copper. A good time to tighten monetary policy?Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-62491209294969418132015-02-09T07:10:33.974-08:002015-02-09T07:10:33.974-08:00The Fed has two options available, and it will pro...The Fed has two options available, and it will probably use both: draining reserves (reversing QE) and raising the interest rate it pays on reserves. It's going to take a long time to get rid of all the excess reserves, but raising the rate paid on the reserves accomplishes what is needed: a higher rate increases the demand to hold the excess reserves. Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-70891859632513204622015-02-09T06:16:21.668-08:002015-02-09T06:16:21.668-08:00Scott, I have to admit I'm a bit baffled these...Scott, I have to admit I'm a bit baffled these days. I've been a fairly staunch lower rates/the Fed isn't going to do anything since around 2011, but of course i worry that I may be staying at the party a bit too long. i still don't quite understand how the fed is actually going to "raise rates". There are something like 2.5Trillion in excess reserves floating around Steve Fultonhttps://www.blogger.com/profile/17201413605319579983noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-4560234956214227382015-02-08T17:03:33.702-08:002015-02-08T17:03:33.702-08:00I thought we were all in agreement that we should ...I thought we were all in agreement that we should have alcoholic beverages at the Cheesecake Factory.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-11742325429874340822015-02-08T07:53:59.733-08:002015-02-08T07:53:59.733-08:00"Milton Friedman said to not confuse low inte..."Milton Friedman said to not confuse low interest rates with easy money. Low interest rates are a sign of tight money and that money has been tight for a long time."<br /><br />So we are now all in agreement that interest rates should rise.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-84792939169788693402015-02-07T18:05:47.907-08:002015-02-07T18:05:47.907-08:00Okay, an analogy, which is like an anecdote, and w...Okay, an analogy, which is like an anecdote, and which proves nothing, but it fun to tell (who didn't love to listen to Ronald Reagan? The guy was great).<br /><br />I have an anorexic friend. Naturally, I told her to eat more, last time I saw her, about a year back.<br /><br />So I saw her yesterday. She said, "You know, I have really eased up on myself. I have been eating a lot more. Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-67600688817084716822015-02-07T17:03:15.809-08:002015-02-07T17:03:15.809-08:00Milton Friedman said to not confuse low interest r...Milton Friedman said to not confuse low interest rates with easy money. Low interest rates are a sign of tight money and that money has been tight for a long time. <br /><br />No economy can get to persistently low interest rates by easy money. <br /><br />Sophisticated institutional investors now are willing to lend Uncle Sam money for 30 years at 2% and change. Small change too. <br /><br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-60986305024528089052015-02-07T11:22:39.854-08:002015-02-07T11:22:39.854-08:00The problem that afflicts most developed countries...The problem that afflicts most developed countries, including China, is too much government: excessively high tax rates, and burdensome regulatory requirements.Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-32514360193572732042015-02-07T11:12:49.926-08:002015-02-07T11:12:49.926-08:00I don't see how Europe, Japan, and China are e...I don't see how Europe, Japan, and China are examples of tight money. They are examples of being too loose and have a debt overhang that restrains further economic activity.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-21834683450347624712015-02-07T08:58:22.151-08:002015-02-07T08:58:22.151-08:00Two observations: Core inflation (ex energy) is st...Two observations: Core inflation (ex energy) is still running around 1.5%. It would take quite a few rate hikes before monetary policy became "tight." The initial moves, which would likely occur over a year or two, would have the effect of removing the "stimulus" from very low interest rates. The Fed will become less easy, not tight, no matter what they do this year. That is Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-14213922134716660112015-02-07T04:32:40.716-08:002015-02-07T04:32:40.716-08:00PCE Chain Price Index
2013-12-01 107.938
2014-01...PCE Chain Price Index<br /><br />2013-12-01 107.938<br />2014-01-01 108.046<br />2014-02-01 108.129<br />2014-03-01 108.292<br />2014-04-01 108.523<br />2014-05-01 108.790<br />2014-06-01 109.034<br />2014-07-01 109.125<br />2014-08-01 109.072<br />2014-09-01 109.150<br />2014-10-01 109.180<br />2014-11-01 109.000<br />2014-12-01 108.746<br /><br />As you can see, by the PCE, prices Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-31726642876973047052015-02-06T20:40:11.569-08:002015-02-06T20:40:11.569-08:00Yes, there are about 2.2 million Americans getting...Yes, there are about 2.2 million Americans getting unemployment. I would eliminate the unemployment system entirely.<br /><br />But what Cochrane and others never want to point out is that there are 3.7 million vets getting "disability," for "service-connected" but non-battlefield injuries. They are getting paid not to work, forever, not for 30 or 90 weeks. The average VA Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-63970371730099840272015-02-06T18:44:01.890-08:002015-02-06T18:44:01.890-08:00The Fed funds rate is largely irrelevant now. The ...The Fed funds rate is largely irrelevant now. The interest paid on reserves (IOR) is now the rate that sets the tone for all other rates. If the Fed is paying, say, 1% on bank reserves, then banks who need reserves will likely have to pay something close to 1% to borrow reserves on the Fed funds market. Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-53839112830956240882015-02-06T18:17:31.772-08:002015-02-06T18:17:31.772-08:00I don't see how increasing the interest paid o...I don't see how increasing the interest paid on reserves will affect the Fed Funds rate because there is so much excess reserves banks don't need to borrow overnight any longer. Their funding needs are fully met. There is no market to affect.<br /><br />So if decreasing liquidity by inactivating reserves isn't an option then the only thing they can do is sell bonds which would Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-48629039151942416142015-02-06T11:21:43.413-08:002015-02-06T11:21:43.413-08:00Excellent post. Simple, logical argumentExcellent post. Simple, logical argumentAustinhttps://www.blogger.com/profile/16846476876421162299noreply@blogger.com