291–300 of 323 posts
The best way I can conceptualize it is running counter-cyclical monetary policy, essentially tweaking supply via cost of capital for orchards.
Rates fluctuated between 4-7%. I tried to keep inflation and menu prices between 1-2% consistently.
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Because saving money is not consuming which is bad for the economy.
Saving money is equivalent to investing. Investing is pretty good for the economy.
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Saving money is equivalent to investing. Investing is pretty good for the economy.
Most "investing" isn't investing either. When you buy Facebook shares on the NYSE not a penny is going to Facebook, you're just transferring shares from one person to another at a new price
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It’s strange to present an analogy without something linking it to the thing at hand. Why do you think interest rates and economy are like racing a car at all and not like launching a rocket?
When you’re making an analogy, you get to choose which aspects of the metaphor are relevant. For example, are you aware that when launching a rocket, you want to avoid wasting fuel by going to full throttle in the thick, lower part of the atmosphere, where you’ll waste a lot of the energy you gain to air resistance? There’s a reason one of the checkpoints in a space shuttle launch sequence was “go for throttle up”. S…
> are you aware that when launching a rocket, you want to avoid wasting fuel by going to full throttle in the thick, lower part of the atmosphere, where you’ll waste a lot of the energy you gain to air resistance?
Yes, you’re referring to “max Q”. It’s still a completely different comparison though because you only have those events early on and then you go full throttle until you hit your first stage goal.
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We should consider a lot of this to be zero-sum. Creditworthy demand for loans doesn't magically increase when rates change or the Fed buys bonds. In QE, like with accounting, you debit one side and credit the other. Netting to zero. The effects it all has probably are real in terms of steering where people park their money. And that matters in the long run. But that would mainly amplify whatever underlying incentive…
You're ignoring refinancing. Cash out refis on homes, businesses and government debt. Somebody doing a cash out refi for 100k to add an extension to their house can certainly be inflationary
I will have to think about this.
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We should consider a lot of this to be zero-sum. Creditworthy demand for loans doesn't magically increase when rates change or the Fed buys bonds. In QE, like with accounting, you debit one side and credit the other. Netting to zero. The effects it all has probably are real in terms of steering where people park their money. And that matters in the long run. But that would mainly amplify whatever underlying incentive…
> Creditworthy demand for loans doesn't magically increase when rates change or the Fed buys bonds This is fundamentally untrue. Projects that don’t make economic sense at a high discount rate do at a lower one. This is measurable with mortgages [1], alongside side a host of other cases. [1] https://app.oarklibrary.com/file/2/f047273e-32ba-40f7-9b83-5...
Mortgages are one of the most annoying things to analyze in the economy, up there with healthcare, because of how much it is dominated by the government.
In the US a bank first makes a home loan, and then later gets money from the overnight market to cover the loan... likely from the Fed. They immediately sell the loan to Fannie and Freddie, GSEs that have actually been in conservatorship by the government directly since 2008. And every part of the market is protected and micromanaged and tax advantaged to oblivion. And every bank too big to fail, and loaded up with TARP funds and their bonds bought via QE.
Apply the principles of supply and demand to that, I dare you.
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Just to clarify, I wasn't suggesting that a Central Bank (using fiat currency) should punish bad actors; I was suggesting that if the Central Bank used Gold, the bad actors may not have existed, or if they did exist, would have been decimated to the point they are essentially replaced by better actors. I'm not saying that the GFC and huge Government debt are the fault of the Central Banks, but they are much more like…
Sure a gold standard is more punishing, and eventually that may force people into better behavior, but by then it may be too late, and you'd be losing out to any country that does bail out their banks. There are always going to be instances in which individual actors don't care about the institutions they're a part of, and the institution isn't guaranteed to catch this bad behavior. For example, plenty of analysts kn…
And if the C suit have such little control that their employees can collapse their company, they are simply incompetent and their losses should not be socialised.
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Central banks and macroeconomists have learned a lot since the Great Depression, mostly of the “don’t do that again” variety. For example the Fed caused the Great Depression by contracting the money supply by a third in the middle of a recession, killing US economic growth for decades. They are unlikely to repeat that mistake.
Yes. This is why they no longer operate on a gold standard, which de facto contracts the money supply (people want to hold "safe" gold rather than circulate money) in the middle of a recession