Fed "patient"?

[Tsing Tao]

That's pretty profound. The question is, will you be long dead by then?

I doubt it unless I die prematurely.

But even your question - absurd as it is - admits poor policy. I mean, if Fed policy was so true and right and moral and correct as you often trumpet it all over the forums with your pom-poms, then there should never be cause for instability, right? Not now, not some time in the future.

 

[piezoe]

I doubt it unless I die prematurely.

But even your question - absurd as it is - admits poor policy. I mean, if Fed policy was so true and right and moral and correct as you often trumpet it all over the forums with your pom-poms, then there should never be cause for instability, right? Not now, not some time in the future.

I just give you my opinion, it is impossible for me to guarantee that I am right. On the other hand, the probability of your open ended statement, that i quoted, being right at anytime in the foreseeable future is near zero. You are aware that the Fed manages monetary policy within the constraints imposed on it by the Congress. Currently the Congress has adopted a hands off policy except in regard to dictating rather nebulous duties. There are those in Congress at this very moment that want to change that. If matters stay as they are, and the Fed is left with a free hand, then I am content that the Fed has monetary matters well under control and has the tools to tackle any emergency with a reasonable chance of occurring.

We have never discussed the morality of monetary policy. I don't know why you mentioned it. In any case it's a topic on which I am unqualified to express an opinion. But on the matter of correctness of Fed policies, you know my opinion well. The Executive Branch, along with Treasury and the Fed, steered our economy through very rough waters during the 2007-2009 financial crisis and the subsequent deep recession with consummate skill. And now the U.S. Fed is the model for other Central Banks around the world! The Fed, of course, under the insouciant, libertarian leadership of Alan Greenspan was remiss in not heading off the crisis; a warning to all us libertarians to be careful what we wish for.

The Fed is not responsible for economic policy, they merely assist in implementing it. What is most regrettable is that our two political parties, other than during those dark hours when Paulson succeeded in scaring the bejesus out of them, pulled in opposite directions and refused to cooperate, as one party made it a priority to ruin the other. Despite this, the Executive Branch, with the Treasury's and Fed's help, was able to engineer a recovery. It could have been better and easier had there been full cooperation, but under the circumstances the result was remarkably good.

 

[Tsing Tao]

I just give you my opinion, it is impossible for me to guarantee that I am right. On the other hand, the probability of your open ended statement, that i quoted, being right at anytime in the foreseeable future is near zero.

Please show me the math behind your probability solution, because those two statements are not aligned with one another.

You are aware that the Fed manages monetary policy within the constraints imposed on it by the Congress. Currently the Congress has adopted a hands off policy except in regard to dictating rather nebulous duties. There are those in Congress at this very moment that want to change that. If matters stay as they are, and the Fed is left with a free hand, then I am content that the Fed has monetary matters well under control and has the tools to tackle any emergency with a reasonable chance of occurring.

Right. Because none of the other bubbles and crashes happened under the Fed's watch - that was all due to congressional meddling, is that it?

We have never discussed the morality of monetary policy. I don't know why you mentioned it. In any case it's a topic on which I am unqualified to express an opinion.

The morality of Fed policy is at the very center of the discussion - whether or not you accept that it is. Making the rich even more so and making the poor even more so, and claiming to do it all "for the better of mankind" or "doing God's work" is the mantra central bankers and their owners (the banking cartel) continue to spew. Only the kool-aid drinkers like yourself agree.

But on the matter of correctness of Fed policies, you know my opinion well. The Executive Branch, along with Treasury and the Fed, steered our economy through very rough waters during the 2007-2009 financial crisis and the subsequent deep recession with consummate skill. And now the U.S. Fed is the model for other Central Banks around the world!

Of this there can be no doubt. Central Banks all over the world are now devaluing their currencies against each other in a race to the bottom, printing money - all kinds - rages unabated. Stock markets at all time highs while world macro data is at lows. Negative interest policy is sprouting up all over. Talks of taxing bank deposits to get people to spend are now discussed in major western economies. Deflation - at least how governments continue to revise the measure - shows no sign of being defeated (which must mean we have to do moar! moar QE - it wasn't big enough!) and corporations continue to take out cheap debt in order to fund stock buybacks and drive their share prices higher. All of this is sustainable, intelligent and savvy financial decision stemming from the amazing efforts of the Fed, despite being 6-7 years after the crisis. "Emergency policy forever!" I hear Evans' speech about how we shouldn't be raising rates any time soon (he means forever).

If anything is wondrous about what the Fed has achieved it's the incredible clusterfuck we all have witnessed. THAT took some work.

The Fed, of course, under the insouciant, libertarian leadership of Alan Greenspan was remiss in not heading off the crisis; a warning to all us libertarians to be careful what we wish for.

Yes, Bernanke was much better:

7/1/05 – Interview on CNBC


INTERVIEWER: Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’ Some say it could even cause a recession at some point. What is the worst-case scenario if in fact we were to see prices come down substantially across the country?


BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.

LOL!

The Fed is not responsible for economic policy, they merely assist in implementing it. What is most regrettable is that our two political parties, other than during those dark hours when Paulson succeeded in scaring the bejesus out of them, pulled in opposite directions and refused to cooperate, as one party made it a priority to ruin the other. Despite this, the Executive Branch, with the Treasury's and Fed's help, was able to engineer a recovery. It could have been better and easier had there been full cooperation, but under the circumstances the result was remarkably good.

Some recovery! Or were you just talking about stocks?

 

[Tsing Tao]

the Executive Branch, with the Treasury's and Fed's help, was able to engineer a recovery.

Recovery.

From Hussman's Weekly Commentary...

• The U.S. has become a nation preoccupied with consumption over investment; outsourcing its jobs, hollowing out its middle class, and accumulating increasing debt burdens to do so.
• U.S. wages and salaries have plunged to the lowest share of GDP in history, while the civilian labor force participation rate has dropped to levels not seen since the 1970’s. Yet consumption as a share of GDP is near a record high. This gap between income and expenses has been financed by debt accumulation, encouraged by the Federal Reserve’s policy of zero interest rates, and enabled by fiscal policies that prioritize income replacement rather than targeted spending and investment.
• Since December 1999, total civilian employment among individuals 55 years of age and older has increased by 15.3 million jobs. Yet total civilian employment – including those over 55 – has grown by only 13.8 million jobs. This means exactly what you think: outside of workers 55 years of age and older, Americans of working age have 1.5 million fewer jobs today than 15 years ago.
• There are now more than 46 million Americans on food stamps, with SNAP (Supplemental Nutrition Assistance Program) expenditures increasing five-fold since 2000.
• While transfer payments and entitlements have increased, government consumption and investment as a share of GDP have declined to near the lowest levels in history. In effect, fiscal policy has been heavily biased toward income replacement, but has otherwise been a deer in the headlights in the face of repeated economic crisis. While the contribution of private investment has slowed to a crawl, fiscal policy – except for transfer payments – has actually been in retreat.
• In the investment sector, real gross private domestic investment has grown at a rate of just 1.5% annually since 1999 (versus a 4.7% real annual rate in prior decades), with growth of just 1% annually over the past decade. Yet while real capital accumulation in the U.S. has weakened, corporate profit margins have never been higher.
• In an economy where wages and salaries are depressed, but government transfer payments and increasing household debt allow households to bridge the gap and consume beyond their incomes, companies can sell their output without being constrained by the fact that households can’t actually afford it out of the labor income they earn. Meanwhile, our trading partners are more than happy to pursue mercantilist-like policies; exporting cheap foreign goods to U.S. consumers, and recycling the income by lending it back to the U.S. in order to finance that consumption.
• Debt-financed consumption, while it proceeds unhindered, is a central driver of elevated corporate profits. Unusually elevated corporate profits (a surplus) are largely a mirror image of unusually large deficits in the household and government sectors.
• The most reliable stock market valuation measures (i.e. the measures that have a nearly 90% correlation with actual subsequent stock market returns) are those that explicitly take account of the level of profit margins and mute the impact of that variability. These measures suggest that the S&P 500 Index is likely to be lower a decade from now than it is today (though dividend income should bring the total return to about 1.5% annually).
• Even if the Federal Reserve was to immediately reduce the monetary base by one-third (from nearly 24 cents of monetary base per dollar of GDP to a smaller 16 cents of monetary base per dollar of GDP), short term interest rates would still be zero.
• Once we account for movements in the Federal funds rate that can be captured by a fairly simple linear policy rule such as the Taylor Rule, additional activist monetary policy (deviations from that rule) have effectively no ability to explain subsequent changes in GDP or employment. There is a strong economic justification for proposals that would require the Fed to outline Taylor-type policy guidelines, and to explain deviations from those guidelines. These proposals should be advocated by Republicans and Democrats alike.
• Yield-seeking speculation promoted by the Federal Reserve caused the housing bubble and the resulting global financial crisis. A change in accounting rules by the Financial Accounting Standards Board in March 2009, not extraordinary monetary policy, is what ended that crisis.
• The true Phillips Curve is a relationship between unemployment and real wage inflation, it cannot be usefully exploited by monetary policy, and it is the only version of the Phillips Curve that actually exists in empirical data. Pursuing general price inflation does not somehow “buy” more jobs. It also does not raise real wages. It lowers them.

More (a good read)

http://www.hussmanfunds.com/wmc/wmc150330.htm

 

[eurusdzn]

I enjoy reading the debate between the two of you. If one tries to attach the specific actions of QE1, QE2,twist, QE3 to the general conditions of the time at least i beleive that QE1 was more
justified and effective than QE3. Duh.
It is difficult for me to accept the results and consequences of QE3. I know the policy of
relatively full employment numbers does not suit seperatimg each QE action. It was a capaign
to hammer that statistic down to a fed acceptible level and i thing the fed would argue the policy as a whole was required.
But , to hang your hat on the employment numbers at the expense of of asset re-inflation,
income inequality,market distortions and likely enhanced systemic risk does not, to me at least,
seem like a respnsible measured response to conditions.
And even at that, the fed and the world sit on a razors edge over a numerically small
adjustment( campaign ? ) that itself can have major unintended consequence. WTF?

 

[Nine_Ender]

Some recovery! Or were you just talking about stocks?

One of the silliest charts I've ever seen in my life. Putting two different scales on top of each other, and when on looks carefully at the GDP, the range is actually quite tight but deliberately stretched out to try to trick people.

So Worldwide GDP went from 3.3 to 2.73. So what ? Those figures tend to support the notion that the whole QE exercise in 2009 on wards worked out, no economic collapse as some of you online nitwits have been pushing on here for years. Let's see the 2009 to 2015 chart for the US for starters, no trick charts either buddy.

Look, most of us who can think for themselves know that you and a few others on here are "out there" and don't have much common sense. You seem to live for drama on here, and don't care if it means stretching the truth ( some would call it dishonesty ). But are you really this stupid ? You might have a career as a US lobbyist, seems to be the kind of job guys like you get, too late to support the cigarette lobby, but the gun lobbyists and similar groups can always need a few like you.

 

[piezoe]

...

From Hussman's Weekly Commentary...
The U.S. has become a nation preoccupied with consumption over investment; outsourcing its jobs, hollowing out its middle class, and accumulating increasing debt burdens to do so.

http://www.hussmanfunds.com/wmc/wmc150330.htm

What does this have to do with the Fed? The Fed is merely an administrative body of the Federal government. It carries out bank regulation and monetary policies according to what Congress has asked it to do. If you are unhappy with the direction the country is taking you should focus you ire elsewhere.

A constructive step would be to suggest something that should be done differently. So far all I've heard from you is the suggestion that the Fed should have followed policies that would have let the country slip into a deep depression.

I can't do better than to suggest you read this: http://www.brookings.edu/blogs/ben-bernanke/posts/2015/03/30-why-interest-rates-so-low

 

[Tsing Tao]

One of the silliest charts I've ever seen in my life. Putting two different scales on top of each other, and when on looks carefully at the GDP, the range is actually quite tight but deliberately stretched out to try to trick people.

So Worldwide GDP went from 3.3 to 2.73. So what ? Those figures tend to support the notion that the whole QE exercise in 2009 on wards worked out, no economic collapse as some of you online nitwits have been pushing on here for years. Let's see the 2009 to 2015 chart for the US for starters, no trick charts either buddy.

Look, most of us who can think for themselves know that you and a few others on here are "out there" and don't have much common sense. You seem to live for drama on here, and don't care if it means stretching the truth ( some would call it dishonesty ). But are you really this stupid ? You might have a career as a US lobbyist, seems to be the kind of job guys like you get, too late to support the cigarette lobby, but the gun lobbyists and similar groups can always need a few like you.

Direction is what is important. Try not to fixate on scale.

By the way, speaking of people who live for drama, I'm shocked you still post here. Didn't you threaten to sue Baron if he didn't delete your account and remove your posts immediately? And what about the time you told us you were done with this site after calling folks petulant children (Atticus, etc)...

What ever happened with that hilarity?

 

[Tsing Tao]

What does this have to do with the Fed? The Fed is merely an administrative body of the Federal government. It carries out bank regulation and monetary policies according to what Congress has asked it to do. If you are unhappy with the direction the country is taking you should focus you ire elsewhere.

A constructive step would be to suggest something that should be done differently. So far all I've heard from you is the suggestion that the Fed should have followed policies that would have let the country slip into a deep depression.

I can't do better than to suggest you read this: http://www.brookings.edu/blogs/ben-bernanke/posts/2015/03/30-why-interest-rates-so-low

I never said it had to do directly to the Fed. I quoted your statement that said a recovery was engineered. Here, just to help you I'll quote your comment again:

Despite this, the Executive Branch, with the Treasury's and Fed's help, was able to engineer a recovery.

To that, I showed that the "recovery" was in actuality, horseshit.

I do, however, note your complete lack of responses to anything in the post prior to that. I don't blame you. I'm sure it gets hard to shill day in and day out!

 

[piezoe]

I never said it had to do directly to the Fed. I quoted your statement that said a recovery was engineered. Here, just to help you I'll quote your comment again:



To that, I showed that the "recovery" was in actuality, horseshit.

I do, however, note your complete lack of responses to anything in the post prior to that. I don't blame you. I'm sure it gets hard to shill day in and day out!

So in your opinion there is no recovery? That's curious. (And a little nutty too.)

Did you read Bernanke's lucid blog on why interest rates are so low?