On the Fed's ability to control unemployment, and other silly Ricter thoughts...

[Tsing Tao]

Quote from bigarrow:

Seriously Tao do you not see where the the author contradicted himself ?

Did you read my reply to your original statement where you claimed he contradicted himself? Take out the sarcasm.

The fact is, the author was talking about two sets of circumstances. One when banks are healthy and rates are low, and today, when banks are sick and rates are low.

One was hypothetical (as to what the Fed is capable of doing) and one is in actuality. There's no contradiction. If you honestly want to have a serious, open debate on it, let's do so. If you're just going to dance around yelling "i win...tee hee" all the time and refuse to acknowledge counter-points, then that's not a debate.

 

[bigarrow]

I went back and reread the article. I didn't get the hypothetical vs what is real. I took the author on what he said and he made a mistake.
Also he is wrong here:
"If capital cost 10% to borrow, only high-quality, low-risk ventures would attract funding or qualify for a loan. At 1% interest, the borrowing costs are so low that all sorts of high-risk, marginal schemes can afford to float loans."

Interest rates and qualifying parameters for borrowers are two different and independent items. Banks don't lower their qualifying standards because rates are lower. In fact rates are lower now and qualifying standards are higher.
This guy is all over the place.

 

[Tsing Tao]

Quote from bigarrow:

I went back and reread the article. I didn't get the hypothetical vs what is real. I took the author on what he said and he made a mistake.
Also he is wrong here:
"If capital cost 10% to borrow, only high-quality, low-risk ventures would attract funding or qualify for a loan. At 1% interest, the borrowing costs are so low that all sorts of high-risk, marginal schemes can afford to float loans."

Interest rates and qualifying parameters for borrowers are two different and independent items. Banks don't lower their qualifying standards because rates are lower. In fact rates are lower now and qualifying standards are higher.
This guy is all over the place.

In regards to your first point, he doesn't outright say it. It is implied that the first circumstance is referring to what the Fed has power over, and what it's influence would be with healthy banks in a perfect world. It is an argument based on what the Fed truly has power to influence (and what my former argument to Ricter is based on - that the Fed cannot control unemployment, and the dual mandate is foolish). He then layers in the condition of banks NOW and brings in Shedlock's comment about how banks cannot force people to borrow even if they wanted to lend (which they don't). I mean, why lend to a risky portfolio when you can make more on parking that money at the Fed and speculating on it?

In regards to interest rates and qualifying parameters for borrowers being two different and independent items, how do you explain the housing boom we just went through, where the lowering of interest rates caused the speculative buying frenzy that made banks no longer care about people's ability to repay? Do you take the position here that the banks were not at fault?

 

[Tsing Tao]

Incidentally, no where in this entire thread did I say the article was a literary masterpiece. But it does convey correct points, which are factually accurate and predicated on an idea that the Fed cannot control unemployment.

That is my main point in my original argument with Ricter and Yglasies (or however you spell that guy's name).

 

[denner]

Quote from Tsing Tao:

In regards to your first point, he doesn't outright say it. It is implied that the first circumstance is referring to what the Fed has power over, and what it's influence would be with healthy banks in a perfect world. It is an argument based on what the Fed truly has power to influence (and what my former argument to Ricter is based on - that the Fed cannot control unemployment, and the dual mandate is foolish). He then layers in the condition of banks NOW and brings in Shedlock's comment about how banks cannot force people to borrow even if they wanted to lend (which they don't). I mean, why lend to a risky portfolio when you can make more on parking that money at the Fed and speculating on it?

In regards to interest rates and qualifying parameters for borrowers being two different and independent items, how do you explain the housing boom we just went through, where the lowering of interest rates caused the speculative buying frenzy that made banks no longer care about people's ability to repay? Do you take the position here that the banks were not at fault?

Why continue to debate this idiot?

Little Arrow found one contradiction in the author's argument (even I will admit the author's point was lost to a certain extent), but as for the rest of it, it was spot on. It clearly laid out the case for how central planning fails, when you have private institutions that have their own self interest at heart and will not simply "pass along" the largesse that the politico's wax poetic about in every campaign speech.

The focus on the failings of ZIRP is also spot on. The media presents a VERY one sided debate about the "benefits" of ZIRP in some pseudo-scientific manner. Nobody, and I mean NOBODY, has put the spot light on just what ZIRP is doing to everyday people, not to mention pension funds, insurance companies, FCM's, etc that have grown quite dependent upon interest income. Once you force the traditionally risk-averse into "risk assets", you're concentrating more risks into this group, which ultimately means another "blow out" event. Just wait until the next market meltdown, we'll see another pension fund debacle and yet another funding shortfall for many of these "guaranteed" pension plans.

Liberals, leftists and academia sympathizers LOATHE any argument against their centrally planned "utopia". Just look towards their neverending support for that lunatic Krugman. I figured once the guy started talking about preparing for an alien invasion and ratcheting up spending in support of it, these idiots would finally see what a crock of shit the guy is all about.

 

[Tsing Tao]

I will debate anyone who offers to do so in a manner which follows generally accepted debating guidelines.

As for the contradiction, again - I get how this could be perceived as such - but you have to remember this is a fund manager writing a letter to his clients. These clients already get the back story and context. They understand where he's coming from. It's no different than walking into a group of folks talking about a given subject at a party and not hearing the whole thing.

I tried to explain that several times now.

 

[bigarrow]

Quote from denner:


Little Arrow found one contradiction in the author's argument (even I will admit the author's point was lost to a certain extent), but as for the rest of it, it was spot on.

I pointed out the contradiction. There was also an error the author made about interest rates and how banks rate borrowers in regards to interest changes, this was as glaringly wrong as his contradiction and I pointed out the author's sarcasm, emotion and hyperbole. Overall it is a very poorly written article. So the author was wrong about two facts and it read like a political forum post. Hard to believe a fund manager sent something this unprofessional out to his investors.

 

[Tsing Tao]

This is what I mean about people who just don't want to debate or budge on anything.

If someone locks themselves in a room, there's little you can do to get them to come out.

 

[denner]

Quote from Tsing Tao:

This is what I mean about people who just don't want to debate or budge on anything.

If someone locks themselves in a room, there's little you can do to get them to come out.

It's just another political argument. If the author had spent his time praising Krugman or citing some manipulated economic stat in support of central planning, we'd have all the leftists on here in favor of the article.

Maybe 10% of the time can you get an honest debate about any of these issues. Hell, why even continue to debate the article itself; why not just ask these central planning zealots how well the Bernanke policies are working?

 

[bigarrow]

Quote from Tsing Tao:

This is what I mean about people who just don't want to debate or budge on anything.

If someone locks themselves in a room, there's little you can do to get them to come out.

What's to debate ? The errors are obvious. Do you just want to practice debating with someone ?
I agree the bankers have major responsibility in the housing bubble, so we're in agreement there. I don't know what would of happened if the Fed hadn't stepped in with the bank bailouts and stimulus. Don't know if there is anything to debate there either since I admit I don't know what would of happened if the FED hadn't of acted. Did you listen to Bernanke today in front of the Senate Banking Committee?
I like listening to smart people who are experts in their field. On economics and FED policy it's only P&R here on ET. Fun, but doubtful any great wisdom, on macro economics anyway. I also like listening to Marc Faber and others to get the view from the other side. The truth is probably somewhere between the two.