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Marcus Nunes/Feb 2, 2016 In early January, he thought four rate hikes in 2016 was in the “ballpark”. In a speech yesterday he was less sanguine, but still believes monetary policy remains accommodative. The framework under which the Fed operates, which Kocherlakota, who knows what he´s talking about, clearly set out recently, permeates the Fischer´s speech: “gradual” and “normalize”. According to Fischer: “[M]y colleagues and I anticipate that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate, and that the federal funds rate is likely to remain, for some time, below… Read More

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Benjamin Cole/Jan 31, 2016 In general, the “class glass” is a poor lens for analyzing U.S. politics and macroeconomic policies. To be sure, the nation has interest-group politics in spades, and groups are often well-financed. And certainly, whenever past Dallas Fed President Richard Fisher sallied forth there was the potential for embarrassing spectacle, as when he held a press conference to condemn wages rising faster than prices. Or to warn that rising prices of antiquarian collectible books harbingered an inflation that merited a tighter monetary noose immediately. But, in general, does Fed monetary policy exhibit class bias? Perhaps So Think… Read More

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Marcus Nunes/Jan 29, 2016 That´s what you get when you do GDP component analysis. Sounds smart but is utterly useless: Macroeconomics should be about aggregates, not components of spending. Yes, changes occurring in the various components of GDP can impact interest rates, and thus velocity. And if monetary policy is inept (i.e. doesn’t offset changes in velocity) that can impact nominal spending, but it certainly isn’t the most illuminating way of looking at the issue. It’s like trying to explain changes in the overall price level by modelling changes in the nominal price of each good—theoretically possible, but a waste… Read More

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James Alexander/Jan 28, 2016 According to the UK Office for National Statistics (ONS) the reason for the heavy downward revisions to UK NGDP are due to heavy downward revisions to the implied GDP Deflator. The deflator is “inflation” as measured for national income statistics. It broadly follows the unreliable, because never revised, UK CPI figures that the BoE tries to manage. The deflator is unreliable too, but at least mistakes are corrected! This time, to be fair, it looks as though the GDP Deflator has been revised down, bringing it into line with the collapsing CPI. Which is “right”, who… Read More

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Marcus Nunes/Jan 27, 2016 To them, inflation, or its absence, is purely a cost phenomenon, pushed up or down by oil prices and/or the dollar and unemployment! Worse, they insist on reasoning from a price change! From the statement: Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. That “sing-a-long” has been going on for such a long time that “medium-term”… Read More

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James Alexander/Jan 27, 2016 I need to apologise. On 23rd December I was asleep on the job of monitoring UK NGDP. Having posted in October on the collapsing proxy for UK NGDP in 3Q15, “Nominal GVA”, and then posted again in November on the first estimate release of actual 3Q15 NGDP, I had not thought to check on the second estimate release for NGDP. Only today when preparing for the release of the UK’s first estimate of 4Q15 RGDP tomorrow and that NGDP proxy, “Nominal GVA”, did I look at that second estimate of 3Q15 NGDP released just before Christmas.… Read More

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Benjamin Cole/Jan 26, 2016 George Selgin, free banker, and one of the most intelligent and enjoyable luminaries in the entire econo-blogo-sphere, took issue with a December 20 post of mine, Zombie Economics Will Never Die. Mostly, I am flattered Selgin even read my post, which reviewed a former Federal Reserve employee Daniel Thornton’s piece for Cato Institute entitled, Requiem For QE. As a preface, let me confess I am a fan of QE, and think the Federal Reserve’s failing was that it employed QE timidly; not open-ended until QE3; never vowed that the Fed balance-sheet increase would be permanent; and,… Read More

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James Alexander/Jan 25, 2016 Of course we welcomed Mr Draghi’s willingness to ease monetary policy announced with at the January ECB meeting last week. And we recognised the positve impact on markets and therefore on NGDP expectations. But was this just a stopgap response to a poorer negative trend? The fight over the direction of US monetary policy between the Fed and the markets will continue to dominate the news. The fight within the ECB will also continue, weakening the credibility of Mr Draghi’s easing bias and the current QE efforts. We think he should open a new front against… Read More

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Marcus Nunes/Nov 29, 2015 Brad DeLong writes “The Trouble With Interest Rates”, where he strongly and rightly critiques views of John Taylor and concludes: There is indeed something wrong with today’s interest rates. Why such low rates are appropriate for the economy and for how long they will continue to be appropriate are deep and unsettled questions; they call attention to what MIT’s Olivier Blanchard calls the “dark corners” of economics, where research has so far shed too little light. What Taylor and his ilk fail to understand is that the reason interest rates are wrong has little to do… Read More

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James Alexander/ Nov. 27, 2015 In mid-2015 Mark Carney stated that the next move in UK rates would be up and that it would come into sharper focus at the turn of the year. This was interpreted as monetary tightening by Market Monetarists and some others. Market prices moved: Sterling, bond prices, UK domestic stock markets as monetary policy impacted future expectations immediately and precisely (ie not in any long and variable fashion). The playing out of the flight path that Carney set in motion is now being seen in the backward-looking actual data. NGDP does not get released in… Read More

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