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Interest Rates Do Not Matter? Pondering International Capital Flows and Property Zoning

Recently, three very thoughtful but different sorts of monetary-policy thinkers have posited, “Interest rates do not matter.” Dan Thornton, a Cato Institute figure but writing for his own blog, recently entitled a post, “The Limits of Monetary Policy: Why Interest Rates Don’t Matter.” Thornton summarizes, “Specifically, it is a well-known and well-established fact that interest
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The Fed and “resource slack”

The Fed “measures” resource slack by what is happening to inflation. It looks, however, at certain numbers – unemployment relative to its view of what constitutes “full employment” and output relative to what constitutes “potential output” – to gauge what is likely to happen to inflation and therefore decide on the degree of monetary policy
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Two kinds of “austerity”

Simon Wren-Lewis has a post titled “Why recessions followed by austerity can have a persistent impact”: The theoretical reasons why supply might adjust to demand are not difficult to find. (They are often described by economists under the jargon word ‘hysteresis’.) Supply (in terms of output per capita) depends on labor force participation, the amount
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By embracing a wrong theory, the Fed goes astray

This piece gives a nice overview “Central Banks Looking to Reduce Stimulus Face Quandary of Falling Inflation – Weak growth in prices questions traditional model of linking output and prices”: According to central bankers, inflation is generated by the gap between the demand for goods and services and the economy’s ability to supply them. When
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Inflation has gone AWOL

Not really. The Fed hid it and forgot where it put it! Nineteen months ago, we heard echoes of today: Federal Reserve officials this week are expected to raise interest rates for the first time in nine years on the expectation that employment and inflation will hit targets reflecting a healthy U.S. economy. Central bank
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Red flags are raised

From Bloomberg: For investors scrambling to keep pace with a hawkish shift in the world’s biggest central banks, the second half of 2017 just got a lot more interesting. Two weeks of rhetoric from policy makers in Europe and North America has rewritten the outlook for markets, with the Bank of England and the Bank
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The Fed Becomes a Demoralizing Embarrassment

The U.S. Federal Reserve is tightening its noose on the U.S. economy, despite being below its 2% PCE inflation target, and despite the sluggish wages that define the American job scene: real hourly wages are down in Q1 (the latest reading) and are up 3.1% in the last 10 years. However, the picture may be
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A veritable “festschrift” on a (new & higher) inflation target

After building-up for several years, the view that the Fed should increase its inflation target has “boomed”. The progression: 2010,  2014, 2016, 2017A, 2017B, 2017C The July 1996 FOMC Meeting witnessed an extended discussion of inflation targeting. Interestingly it was Janet Yellen and Laurence Meyer´s first FOMC Meeting. Interesting because they are the two strong
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Low unemployment: Root of all evil?

Yes, according to this piece: “Other Times Unemployment Has Been This Low, It Didn’t End Well” There have been only three fleeting periods in the past half-century when the U.S. unemployment rate was as low as it is today. This would be cause for celebration but for one disturbing fact: in hindsight, each period was
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