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The Economy Got Off to a Historically Bad Start in 2014

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Re: The Economy Got Off to a Historically Bad Start in 2014

#11

Post by oldmanjay »

jacobolus wrote: post #3
nostromo wrote: post #2

I'm starting to wonder if the Federal Reserve is no longer an effective tool for job creation. After years of propping up the economy and expanding the supply of money, we have very little to show for it on "main street." We have booming real-estate prices in some cities, a growing stock market, and lots of cheap money flowing into the hands of the wealthy -- but most regular folks have been completely shut out of th…

Just sending checks to all citizens is politically difficult, because it starts conversations about “class warfare” and “socialism”, and implies that the federal government should have a policy of explicit wealth redistribution, rather than the current hodge-podge of means tested welfare programs and monetary policy tools. But to answer your question: yes, we’d increase liquidity, reduce unemployment and dramatically…

What I like about wealth redistribution scenarios is how they're so much easier to sell when you ignore the potential negative effects.

Re: The Economy Got Off to a Historically Bad Start in 2014

#12

Post by dragonwriter »

nostromo wrote: post #7
jacobolus wrote: post #3

Earlier quoted context omitted.

Just sending checks to all citizens is politically difficult, because it starts conversations about “class warfare” and “socialism”, and implies that the federal government should have a policy of explicit wealth redistribution, rather than the current hodge-podge of means tested welfare programs and monetary policy tools. But to answer your question: yes, we’d increase liquidity, reduce unemployment and dramatically…

Let's put aside the Federal Government (and taxes and spending) for a moment and focus on the Federal Reserve. The Federal Reserve printed a large amount of money in response to the crisis. (That was a silent tax on anyone holding cash.) To inject this money into the economy, they bought a bunch of securities. My question is simply: why use asset buying as a vehicle for injecting money into the economy and not cash t…

> The Federal Reserve printed a large amount of money in response to the crisis. (That was a silent tax on anyone holding cash.) To inject this money into the economy, they bought a bunch of securities. My question is simply: why use asset buying as a vehicle for injecting money into the economy and not cash to citizens?

Because that's all that the Federal Reserve can do. If you want someone to do something else, you'll need to talk to the government, not the Fed (even if that is just talking to the government about changing the rules on what the Fed can do.)

Of course, the more you give flexibility to the Fed to do more of the things that otherwise would be within the domain of the government, the more you undercut the whole point of an independent central bank (while simultaneously undercutting democratic accountability.)

> It seems the Federal Reserve's strategy of the past 5 years has done very little to reboot the economy, and has worsened wealth inequality dramatically.

The Federal Reserve, by design, does not have a general set of tools for dealing with the economy, but a very limited set of tools for managing the money supply.

Re: The Economy Got Off to a Historically Bad Start in 2014

#13

Post by Retric »

nostromo wrote: post #2

I'm starting to wonder if the Federal Reserve is no longer an effective tool for job creation. After years of propping up the economy and expanding the supply of money, we have very little to show for it on "main street." We have booming real-estate prices in some cities, a growing stock market, and lots of cheap money flowing into the hands of the wealthy -- but most regular folks have been completely shut out of th…

The US has huge structural problems and the Fed is just a useful band-aid. It's value is stabilizing the banking system not the economy.

Systemic Corruption, Terrible primary education system, Ridiculous Military Spending, Unsustainable Debt Levels, Minimal Infrastructure Spending, Huge undocumented Immigrant population, Ridicules Sentencing Laws, Anti Middle Class / Start-up Tax Code, Legislation Requiring Middle Men (Cars, Healthcare, etc), Pro Lawyer legal system, etc. We even get basic things wrong like promoting home ownership and heavily subsidizing farming.

What people forget is the US's primary advantage was simply abundant natural resources and getting though WWII without loss of infrastructure.

Re: The Economy Got Off to a Historically Bad Start in 2014

#14

Post by shirkey »

valas wrote: post #9
fidotron wrote: post #5

Earlier quoted context omitted.

Wouldn't your proposal cause massive inflation? My understanding is the fed are somewhat obsessed with keeping inflation down, possibly to a fault.

Feds are obsessed with keeping inflation at a certain level, not at zero. I think the target is 3%, while current inflation is around ~2%.

Government stated inflation based on chained CPI and other new measures to reduce inflation may be at around 2%, but previous formulas used in the past to calculate inflation would show a much higher rate (6-10%)[1]. For those actually buying or consuming anything, that official number is a farce.

[1] http://www.shadowstats.com/alternate_data/inflation-charts

Re: The Economy Got Off to a Historically Bad Start in 2014

#15

Post by jlmorton »

nostromo wrote: post #7
jacobolus wrote: post #3

Earlier quoted context omitted.

Just sending checks to all citizens is politically difficult, because it starts conversations about “class warfare” and “socialism”, and implies that the federal government should have a policy of explicit wealth redistribution, rather than the current hodge-podge of means tested welfare programs and monetary policy tools. But to answer your question: yes, we’d increase liquidity, reduce unemployment and dramatically…

Let's put aside the Federal Government (and taxes and spending) for a moment and focus on the Federal Reserve. The Federal Reserve printed a large amount of money in response to the crisis. (That was a silent tax on anyone holding cash.) To inject this money into the economy, they bought a bunch of securities. My question is simply: why use asset buying as a vehicle for injecting money into the economy and not cash t…

Because just as the Federal Reserve can arbitrarily expand its balance sheet to purchase assets, it can also arbitrarily shrink its balance sheet when it sells those assets.

In other words, the Fed can print money to buy assets, increasing money supply, but given the large increases during the recovery, if inflation picks up the Fed might want to shrink the money supply. It can only do that by selling assets and destroying the money it receives.

Re: The Economy Got Off to a Historically Bad Start in 2014

#16

Post by bsilvereagle »

valas wrote: post #9
fidotron wrote: post #5

Earlier quoted context omitted.

Wouldn't your proposal cause massive inflation? My understanding is the fed are somewhat obsessed with keeping inflation down, possibly to a fault.

Feds are obsessed with keeping inflation at a certain level, not at zero. I think the target is 3%, while current inflation is around ~2%.

Why would the Feds want inflation and not a flat line?

Re: The Economy Got Off to a Historically Bad Start in 2014

#17

Post by javert »

nostromo wrote: post #2

I'm starting to wonder if the Federal Reserve is no longer an effective tool for job creation. After years of propping up the economy and expanding the supply of money, we have very little to show for it on "main street." We have booming real-estate prices in some cities, a growing stock market, and lots of cheap money flowing into the hands of the wealthy -- but most regular folks have been completely shut out of th…

Long run, the fed is just a way to transfer wealth from the poor and lower middle class to everyone else.

Re: The Economy Got Off to a Historically Bad Start in 2014

#18

Post by javert »

nostromo wrote: post #2

I'm starting to wonder if the Federal Reserve is no longer an effective tool for job creation. After years of propping up the economy and expanding the supply of money, we have very little to show for it on "main street." We have booming real-estate prices in some cities, a growing stock market, and lots of cheap money flowing into the hands of the wealthy -- but most regular folks have been completely shut out of th…

Long run, the fed is just a way to transfer wealth from the poor and lower middle class to everyone else.

Re: The Economy Got Off to a Historically Bad Start in 2014

#19

Post by pbreit »

nostromo wrote: post #2

I'm starting to wonder if the Federal Reserve is no longer an effective tool for job creation. After years of propping up the economy and expanding the supply of money, we have very little to show for it on "main street." We have booming real-estate prices in some cities, a growing stock market, and lots of cheap money flowing into the hands of the wealthy -- but most regular folks have been completely shut out of th…

The concept if "the fed creating jobs" is rather hard to swallow.

But I do dort of agree that it looks like consumption is more important than investment at this juncture (always?).

Re: The Economy Got Off to a Historically Bad Start in 2014

#20

Post by pbreit »

nostromo wrote: post #2

I'm starting to wonder if the Federal Reserve is no longer an effective tool for job creation. After years of propping up the economy and expanding the supply of money, we have very little to show for it on "main street." We have booming real-estate prices in some cities, a growing stock market, and lots of cheap money flowing into the hands of the wealthy -- but most regular folks have been completely shut out of th…

The concept if "the fed creating jobs" is rather hard to swallow.

But I do dort of agree that it looks like consumption is more important than investment at this juncture (always?).

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