tag:blogger.com,1999:blog-5154389358831836369.post1743826605685912329..comments2024-03-29T05:29:58.148-04:00Comments on The Slack Wire: Interest Rates and Expectations: Responses and Further ThoughtsJW Masonhttp://www.blogger.com/profile/10664452827447313845noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5154389358831836369.post-40634609073328007892012-07-14T19:09:50.139-04:002012-07-14T19:09:50.139-04:00There are two links that have to operate for monet...There are two links that have to operate for monetary policy, as usually conceived, to be effective. First, changes in the policy rate have to affect long rates. And second, changes in long rates have to affect expenditures, especially expenditures on long-lived assets. If either is broken, monetary policy won't be able to move the real economy. There is an interesting debate about the second link, but here I am focusing on the first one.JW Masonhttps://www.blogger.com/profile/10664452827447313845noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-27374044866410776552012-07-14T14:33:44.975-04:002012-07-14T14:33:44.975-04:00How do 14% or even 20% fall in value reconcile wit...How do 14% or even 20% fall in value reconcile with YoY sales easily going +-20%? Isn't former 14% or 20% a rounding error in business decisions?Игры рынкаhttps://www.blogger.com/profile/12001273098690387194noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-32152259790040350632012-07-12T12:50:15.588-04:002012-07-12T12:50:15.588-04:00Interesting set of posts. I question the attribut...Interesting set of posts. I question the attribution of views on the liquidity trap to Keynes (for one thing, the term did not come into use until after his death). He explicitly questioned the idea that the zero boundary on short term rates would necessarily prevent the central bank from reducing long term rates--on grounds that it could deal in long term debt, though, as he said, "owing to the unwillingness of most monetary authorities to deal boldly in debts of long term, there has not been much opportunity for a test." This is in Chapter 15 of the GT. In other words, he advocated QE. So we are living through the experiment that JMK proposed. Perhaps QE has contributed to the low 10 and 30 year yields? That it has worked to reduce rates modestly seems to be the consensus at the NYFed (e.g., Sack, Gagnon), based on a modern version of the "preferred habitat" model of the yield curve. On my reading, Keynes' idea of depression economics, like Minsky's, rests on the IS curve, not the liquidity trap (LM curve).tom mhttps://www.blogger.com/profile/06218456457883749242noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-18069153971874635432012-07-09T19:20:13.186-04:002012-07-09T19:20:13.186-04:00About hypothesis 1: maybe it is not low rates that...About hypothesis 1: maybe it is not low rates that causes high income but the lowering of the rates. When rates of interest fall the total amount of debt rises. the increase of debt causes a cash flow that boosts demand temporaneously, in the same way keynesian stimulus would.<br />However when debt reaches its new maximum level aggregate demand falls again. <br />I think this is Steve Keen's idea.Random Lurkernoreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-43868154802706731702012-07-09T09:20:40.426-04:002012-07-09T09:20:40.426-04:00There is one other channel, apart from bringing do...There is one other channel, apart from bringing down long rates. The capacity of low short rates, especially negative ones, to erode risk aversion. <br /><br />This is consistent either with the state of the world that you are thinking about (low short and long rates), or a different one where the short and long rates are both more *normal*, but the increase in the natural rate has been brought about not (or at least not just) by fiscal policy, but by a destruction of the capital chasing stock safe returns.Ritwikhttps://www.blogger.com/profile/00616694597577112758noreply@blogger.comtag:blogger.com,1999:blog-5154389358831836369.post-20983463070493224362012-07-09T00:37:46.264-04:002012-07-09T00:37:46.264-04:00Hey Josh.
Two quick comments that might miss the ...Hey Josh.<br /><br />Two quick comments that might miss the mark. <br /><br />First, where does the story that monetary policy works when monetary policy caused the recession in the first place fit in? To abuse the punch bowl metaphor, the Fed can easily bring the punch bowl back to the party after they have taken it away, but they may not be able to produce punch for a party that doesn't have one. Eventually they come back with an empty bowl, wondering why they can't get people drunk anymore.<br /><br />Second, I'm not confident about this, but in the context of the importance of heterogeneous expectations in the bond market, could you understand some types of QE as an instance of acting like bears in a market that "needs" them? I'm not really arguing for QE here, just trying to better understand the topic.joseph göner-rebellohttps://www.blogger.com/profile/16966239737843409047noreply@blogger.com