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Economists’ projections of interest rates and unemployment have proved too high

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Re: Economists’ projections of interest rates and unemployment have proved too high

#101

Post by ambernightcruse »

raxxorrax wrote: post #76
qubex wrote: post #33

Earlier quoted context omitted.

As an economist: yes.

How so if money is created by commercial banks today with a fictional multiplier for bonds (did I get that right?)? I believe money to be an intermediary, but it works because we all believe that it does have an inherent value. At least as long as it is relatively stable for the time frame between earning and spending. If I cannot use it for any form of saving, we had a primitive market of natural produce for any for…

Commercial banks don't create money, they create loans. And when loans are zeroed out they no longer exist. There's interest that is earned as revenue and eventual profit, but only the Treasury creates money.

Money doesn't work on faith. Money is debt. The currency issuer takes on debt(the US government.) The debt is coined/minted/printed to fulfill some government budget. These dollars go to people to build/work/service the programs. The government coerces people into working by raising a tax. If the government runs a deficit, then the private sector has a net positive gain. If the government runs a surplus, then the private sector has a net loss(e.g., austerity.)

You don't want to restrict the creation of money if the economy is expanding. You want the money supply to grow or else you will have deflation.

Re: Economists’ projections of interest rates and unemployment have proved too high

#102

Post by ambernightcruse »

claudeganon wrote: post #15
joshuaellinger wrote: post #2

Except for the MMT people. They mostly got it right but they don't count as 'real' economists to the WSJ.

Do you know does MMT says about printing money for the express purpose of infrastructure development? I’d be interested to see what their take would be on doing so for doing things like high speed internet expansion, decentralized green grids, etc. In housing, the fed doing this has obviously led to real estate asset bubbles, but what would happen in the case of public assets?

There's no reason to assume that there's real estate asset bubbles, we don't have overlending/unqualified lending. You could argue that there's scarcity in real estate, driven by local governments restricting the supply of housing through historic regulations and single family housing. And that as a result, the only time of private investment that can earn a return is luxury housing which fails to be affordable for a large segment of the population.

MMT doesn't say anything about what you use the funds for, but, if you're a Keynesian then you need to keep your eye on productivity and growing GDP, and you need to worry about inflation. Depending on your politics then you could spend on public assets like infrastructure, green energy, etc. But most MMTers suggest a federal jobs guarantee that would create a buffer for people that the private market will not employ. The job guarantee would employ people to do all sorts of public projects to anyone willing and able to work. You just have to be careful about inflation. If you spend money on steel and concrete and you put people to work in construction, you're going to suck up resources that the housing industry needs, and if you don't have the resources you're going to get inflation. Ideally you'd spend money in areas where the private sector doesn't want to or cannot deliver low costs(e.g., education, environmental cleanup, healthcare.)

Re: Economists’ projections of interest rates and unemployment have proved too high

#103

Post by coldtea »

bhupy wrote: post #100
hash872 wrote: post #94

It's fascinating to me that even august publications like the Wall Street Journal continue to use 'unemployment rate' as any kind of reliable metric, and says stuff like 'the unemployment rate is at a 50 year low now'. Unemployment just measures those who are actively looking for full-time employment but are unable to find it (and yes there is a separate underemployment metric, which seems a little more accurate). Th…

The U6 rate is also at historic lows, and that's the broadest definition of "unemployment", which includes discouraged workers. https://fred.stlouisfed.org/series/u6rate

What they never measure is the big rise in BS near-substinence hand-to-mouth jobs over higher quality gigs - which is the case in many (most?) countries...

Re: Economists’ projections of interest rates and unemployment have proved too high

#104

Post by Retric »

ambernightcruse wrote: post #92
aazaa wrote: post #87

> Economists have been casting around for the answer, a theory to explain their inability to peer accurately in the months ahead, let alone the years. ... No mention of "quantitative easing" anywhere. QE ran in various forms from 2008-2013. Short term rates were held at zero in the US from 2008-2015. Several industrialized areas now have negative nominal rates. The Fed has started QE back up again to prop up the fail…

There's no mention about QE because QE is only about lowering the cost for the private sector to borrow money. The main threat to QE is inflation, which is hovering around 2% and stubbornly low, so QE is in the clear. The repo purchases are operating as intended, with new liquidity requirements for banks from Basel 3 reforms. Also you complain about negative nominal rates, which make banks less likely to lend; then y…

Banks are far from the only lender. The US bond market is 40 trillion dollars worth of loans, where banks are closer to 14 trillion in loans.

Re: Economists’ projections of interest rates and unemployment have proved too high

#105

Post by bhupy »

coldtea wrote: post #103
bhupy wrote: post #100

Earlier quoted context omitted.

The U6 rate is also at historic lows, and that's the broadest definition of "unemployment", which includes discouraged workers. https://fred.stlouisfed.org/series/u6rate

What they never measure is the big rise in BS near-substinence hand-to-mouth jobs over higher quality gigs - which is the case in many (most?) countries...

You're right, that information is captured by the median weekly inflation-adjusted earnings for wage and salary workers, which is actually at historic highs.

https://fred.stlouisfed.org/series/LEU0252881600A

Combining the U6 unemployment rate with the real median earnings paints a more complete picture.

Re: Economists’ projections of interest rates and unemployment have proved too high

#106

Post by ur-whale »

imglorp wrote: post #39

Someone please correct my impression here, but why aren't both macro- and micro-econ viewed as a largely academic ideal that completely ignores many realities of human civiliation? I'm thinking specifically of malice and manipulation, at all levels of all systems: if there is a way to enrich (ie steal), motivation is towards it happening and towards weakening rules and oversight. For example, who wants to quibble ove…

> why aren't both macro- and micro-econ viewed as a largely academic idea

Because it's easier to get funding when you claim to be a science.

The fact that the discipline has exactly zero predictive power is rarely brought up by practitioners (of course), nor particularly noticed from the people who consume the by-product of said discipline.

Re: Economists’ projections of interest rates and unemployment have proved too high

#107

Post by AmericanChopper »

duxup wrote: post #29

Is it because say unemployment has proven to be a strange concept these days with "underemployment" being a larger concern? Perhaps they were simply predicting the wrong thing / things that don't seem as relevant.

Underemployment is an entirely subjective concept though. Having skills that that you can’t sell due to insufficient demand doesn’t necessarily say anything about the market at all.

Re: Economists’ projections of interest rates and unemployment have proved too high

#109

Post by JamesBarney »

aazaa wrote: post #87

> Economists have been casting around for the answer, a theory to explain their inability to peer accurately in the months ahead, let alone the years. ... No mention of "quantitative easing" anywhere. QE ran in various forms from 2008-2013. Short term rates were held at zero in the US from 2008-2015. Several industrialized areas now have negative nominal rates. The Fed has started QE back up again to prop up the fail…

Why is QE a market distortion? Is all monetary policy a market distortion? If we used a gold standard is that not a market distortion? If the price of gold changes drastically due to gold mines closing/opening changing interest rates is that a market distortion?

Re: Economists’ projections of interest rates and unemployment have proved too high

#110

Post by lotsofpulp »

bhupy wrote: post #105
coldtea wrote: post #103

Earlier quoted context omitted.

What they never measure is the big rise in BS near-substinence hand-to-mouth jobs over higher quality gigs - which is the case in many (most?) countries...

You're right, that information is captured by the median weekly inflation-adjusted earnings for wage and salary workers, which is actually at historic highs. https://fred.stlouisfed.org/series/LEU0252881600A Combining the U6 unemployment rate with the real median earnings paints a more complete picture.

I would have to combine it with changes in CoL in areas of economic opportunity versus those without. Parts of the country offer far more security in future income than others.
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