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Fed Ends Zero-Rate Era

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Re: Fed Ends Zero-Rate Era

#251

Post by crdoconnor »

vezzy-fnord wrote: post #248
crdoconnor wrote: post #244

Earlier quoted context omitted.

I'm not at all concerned about economists who are "for" or "against" the minimum wage. They can hold whatever opinions they want if they don't lie. It's the economists who poorly design studies with the intent of demonstrating that it either causes prices to rise uncontrollably (which it doesn't), causes unemployment to rise (which it also doesn't) and who pointedly never, ever, ever look at the effect it has on prof…

Economists are agents of bourgeoisie capitalism, then. Alright, I'll end here.

Well, we shouldn't pretend that they don't respond to incentives.

Re: Fed Ends Zero-Rate Era

#252

Post by brc »

jvproject wrote: post #243
millstone wrote: post #161

Earlier quoted context omitted.

In terms of stimulating aggregate demand, transfers to people who will spend the money are more effective than transfers to people who spend less (i.e. save more). In practice that means food stamps, unemployment benefits, etc. are more effective than tax cuts directed at high earners.

This seems like a common point in this thread with which I respectfully disagree. While I'm sure we all support the notion that there is social good in reducing income inequality in the U.S. and improving quality of life for all, consumers in lower tax brackets will tend to spend additional income on staples, marginal quality-of-life improvements and servicing past debt. While this spending (increased aggregate deman…

I agree with most of your points just that I'd tweak it slightly and say that Bill Gates vs the Hobo are better at producing, rather than saying that Bill Gates is better at creating demand. It's a very slight shift but it's important to recognise that it is the very act of producing that enables trade and the wealth that comes.

Gates and the Hobo have the same ability to spend (ie demand) with the money you give them, but Bill Gates and the Hobo do not have the same ability to produce. That is why Gates is Gates and the Hobo is the Hobo. It is the fact that Gates has a propensity and skill to take the $100 and create value (production) from it that gives Gates the ability to grow the pie for everyone.

Re: Fed Ends Zero-Rate Era

#253

Post by shostack »

Domenic_S wrote: post #184
shostack wrote: post #137

Earlier quoted context omitted.

I think the big question though is that in super hot markets like SF and the Peninsula, will the demand actually go down enough to slow things? There's a LOT of all cash offers still coming in from overseas. Sure they might have less competition, but I feel like the aggregate demand is so massive and available supply is so restricted (in large part due to Prop 13) that even higher interest rates wouldn't put a big da…

> There's a LOT of all cash offers still coming in from overseas. Not as many as you think. Saw this the other day: The San Francisco and San Jose metro areas ranked ninth and sixth from the bottom, with all-cash deals representing only 28 and 24 percent of purchases, respectively. All-cash sales in San Francisco peaked at 36 percent in the first quarter of 2010, Zillow said. http://www.sfchronicle.com/business/netwo…

That's really interesting, thanks for sharing your source. I wonder if that accounts for "offers" vs. "buyers." If you have the assets, you can make an all cash offer and come across as much competitive, and then switch things out after your offer is accepted to finance whatever percentage you want without the seller ever knowing. That's a fairly common tactic I've heard about and could definitely skew these numbers depending on what the data represents.

But the broader point of demand is obviously the bigger concern. What are your thoughts on the factors that would impact that? Personally, I see a place to live that has great weather, schools, people, food, culture, jobs, tech, and things to do. It also has proximity to eastern countries which makes it desirable to them. Given the finite land, building restrictions and Prop 13, I really wonder what it would take to have a significant long term hit to prices.

Some really interesting data here:

http://www.paragon-re.com/3_Recessions_2_Bubbles_and_a_Baby

Re: Fed Ends Zero-Rate Era

#254

Post by washedup »

dsr_ wrote: post #50
roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

If you want to stimulate aggregate demand at the consumer level, you need more people to have good jobs, so they can make money, so they can spend money. This would represent a reversal of the trend since 1970 towards greater income inequality. It is not clear to me that anyone is doing anything about that (except, of course, in the negative sense.)

Cheap debt has been one "solution", but this can only work temporarily.

Re: Fed Ends Zero-Rate Era

#255

Post by theGimp »

eru wrote: post #212
theGimp wrote: post #207

Earlier quoted context omitted.

I'm not sure if the Fed pulled back the trillions it pumped into the banks during the crisis, but until that happens, banks don't have a real incentive to compete for deposits.

And isn't that how it should work? The extra money around is supposed to make people do something with their money apart from depositing it with a bank.

The money didn't go to people. It went to banks.

The reason the Fed issued the money to banks is so they don't collapse.

Why would they collapse? Banks use deposits as collateral to make investments. During the crisis, a lot people and institutions were panicking and withdrawing whatever they had in the market.

So the Fed issued a bunch of money and loaned it to banks on generous terms to prevent a Domino effect where institutions fail one by one.

It's probably what prevented a giant meltdown of the economy.

It also changed the dynamic for the banks. They were loaned trillions by the Fed for next to nothing -- much better deal than fighting over people's deposits. So we won't see deposit interest rise until some of that money is taken away. (My understanding is that hasn't happened.)

A couple years ago, the Fed paid the banks to sit on that money and not use it, but I'm not sure if that's related. Somebody more informed might be able to fill that gap.

Re: Fed Ends Zero-Rate Era

#256

Post by brc »

SapphireSun wrote: post #241
brc wrote: post #233

Earlier quoted context omitted.

Demand is not want. Demand is standing at a cash register with cash, asking for a product. Although demand in the economic sense sort-of-sounds like want - certainly I'd like a new Lamborghini - I have zero effect on the demand for lamborghinis. The level of spending (poverty vs wealth) is mostly irrelevant because that's a value line someone draws on a graph somewhere. Poverty in the Midwest is not the same as pover…

Err... I guess I used the word want loosely. I meant demand. Savings are just postponed consumption, but if the consumptions of multiple people never align (you could save until you're dead) the aggregate demand will never rise to a high level.

Well, that's still not true. Savings are put to use by investing - either by the saver or someone else on their behalf (capital markets/banks). The savings further production by being used by someone else.

Keynes had to kill the idea that production is the foundation of growth in an economy. He did this by implanting the idea that production is irrelevant, all you needed as spending (the fantasy of aggregate demand). This was further pushed by the universal declaration that savings were a problem because it was postponed - rather than transferred. Once this foundation was laid, the idea that throwing more money at people would increase wealth was created, and enthusiastically adopted by politicians who could use it as an excuse to throw money around in good times and bad.

Savings are the foundation of future production, and future production is the foundation of future wealth. This is so self evident it takes a high level of internal contradictions to believe it not to be so.

Re: Fed Ends Zero-Rate Era

#257

Post by hodwik »

mikeash wrote: post #227
hodwik wrote: post #94

Earlier quoted context omitted.

Has to be sarcasm. People who actually believe that wouldn't say "politicians", they'd use some other euphemism, because they believe in some abstract trustworthy organization that's always being hampered by those damn politicians. Statists love their euphemisms: “investment” instead of “government spending” “shared sacrifices” instead of "wealth redistribution" "government officials" instead of "un-elected bureaucra…

Yes, of course, all of your terminology is straightforward, and the terminology preferred by those who disagree with you is "euphemisms."

I didn't claim my language was "straightforward", any term we use will carry bias. That's how political language works.

"Investment" automatically biases you to think that said spending must have a net-good result. Calling it "Government spending" predisposes you to think about the price of said action.

Biased language is always annoying to the other side. When I hear the liberal euphemisms I groan as strongly as I suspect most liberals groan to my dysphemisms.

If you said libertarians love their dysphemisms I wouldn't hold it against you.

Re: Fed Ends Zero-Rate Era

#258

Post by dragonwriter »

vezzy-fnord wrote: post #235
crdoconnor wrote: post #224

Earlier quoted context omitted.

>Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... . tl;dr if you raise the minimum wage imperceptibly, poverty reduction is affected imperceptibly and prices are affected imperceptibly. In general if something will have a negative effect on corporate profits (minimum wage hikes have an outsized effect on corporate profits) you will be able to find a legion of economists wh…

The reason many economists are unsure or against the minimum wage is not because they're some agents of bourgeoisie capitalists, but because arguments in favor of it tend to be moral, not economic. For instance, here's a case for the minimum wage presented by an (otherwise very knowledgeable, I'll grant) Post-Keynesian economist: http://socialdemocracy21stcentury.blogspot.com/2013/02/the-e... It's pretty weak. The fi…

> The reason many economists are unsure or against the minimum wage is not because they're some agents of bourgeoisie capitalists, but because arguments in favor of it tend to be moral, not economic.

All policy arguments are moral. Economics (to the extent it is a useful, predictive, empirical science) can tell you what outcomes to expect from what actions, but not tell which actions should be preferred, without first assuming some moral values.

(OTOH, some of what passes for economics is itself not a predictive, empirical science but a form of moral advocacy in itself; but in that sense, you can't distinguish "moral" from "economic".)

Re: Fed Ends Zero-Rate Era

#259

Post by hodwik »

ubernostrum wrote: post #139
hodwik wrote: post #94

Earlier quoted context omitted.

Has to be sarcasm. People who actually believe that wouldn't say "politicians", they'd use some other euphemism, because they believe in some abstract trustworthy organization that's always being hampered by those damn politicians. Statists love their euphemisms: “investment” instead of “government spending” “shared sacrifices” instead of "wealth redistribution" "government officials" instead of "un-elected bureaucra…

Statists love their euphemisms My irony detector has just exploded. Can you direct me to a completely-unregulated minarchist free-for-all market where I can buy one that merely poisons me and everyone in a hundred-mile radius? Because at least it would actually work.

You have to pay extra for the poison. This is libertarian land, dude. NOTHING is free, even poison.

Re: Fed Ends Zero-Rate Era

#260

Post by pitt1980 »

vezzy-fnord wrote: post #235
crdoconnor wrote: post #224

Earlier quoted context omitted.

>Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... . tl;dr if you raise the minimum wage imperceptibly, poverty reduction is affected imperceptibly and prices are affected imperceptibly. In general if something will have a negative effect on corporate profits (minimum wage hikes have an outsized effect on corporate profits) you will be able to find a legion of economists wh…

The reason many economists are unsure or against the minimum wage is not because they're some agents of bourgeoisie capitalists, but because arguments in favor of it tend to be moral, not economic. For instance, here's a case for the minimum wage presented by an (otherwise very knowledgeable, I'll grant) Post-Keynesian economist: http://socialdemocracy21stcentury.blogspot.com/2013/02/the-e... It's pretty weak. The fi…

"agents of bourgeoisie capitalists"

I don't wonder about the sincerity of most economists

I do wonder if there are selection pressures to becoming an economist that prevent a diversity of viewpoints on certain issues

sometimes those neatly line up with the bourgeoisie capitalists (who just coincidentally disproportionately have their names on university building and have levers on which university departments get generous funding)

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