1. Consolidation. "The fourth cost is the possibility that the Fed could incur financial losses on its enlarged balance sheet. Bernanke simply dismisses this cost altogether when it is viewed in the overall context of the national balance sheet. To date the Fed has earned extraordinary profits from quantitative easing. The Treasury also has gained both from lower borrowing costs and from higher tax revenues. The Treasury’s gains far exceed any possible losses to the Fed. And private citizens receive further benefits to the extent that quantitative easing has boosted employment." [emphasis added]
2. Setting price rather than quantity. "But the Fed could address this problem by announcing adjustable daily targets for the yields of the securities it is buying. To hit these targets it would accelerate or decelerate its rate of purchase within the day." [emphasis added]
WCEG — The Equitablog
Joe Gagnon Responds to Michael Woodford, Ben Bernanke, and Others on the Risks and Power of Quantitative Easing: Friday Focus (December 20, 2013)
Brad DeLong
5 comments:
The metonymy here is that "the Fed is a business" and therefore this is loaded with false metaphor, here Ill point out the false metaphor:
cost, losses, balance sheet, earned, profits, easing, gained, borrowing, revenues,
Thats about it that I can see...
So it looks like it works this way:
The metonymy establishes the overall false context and then the metaphors are used as individual agents to deceive the rubes...
Similar to 'strategy and tactics' ie the metonymy is the higher level strategy and the metaphors are the lower level tactics...
rsp
Dan's over there in the comments:
"The Fed is not a private sector enterprise whose value to the public is measured by its financial profitability:"
right Dan is taking exception to the metonymy of "the Fed is like a business" ...
So we have to point out to Gagnon (rube) that HIS METONYMY is incorrect according to Wittgenstein... iow we not only have to 'disagree' with Gagnon here, have to tell Gagnon that he (Gagnon) is specifically using a false "metonymy" ...
Here is Wittgenstein on this: "solved through an insight into the workings of our language, and that in such a way that ...these... workings... are ...recognized"
According to Wittgenstein, we have to say it like this: "Joe, you are using a FALSE METONYMY there Joe, STOP IT, the Fed is NOT a business enterprise, it is a govt agent and this is a FALSE metonymy you are applying...stop it."
Specifically calling out the metonymy BY NAME so as to as Wittgenstein puts it: "the WORKINGS are RECOGNIZED..."
rsp,
Dan continues:
"The Fed is not a private sector enterprise whose value to the public is measured by its financial profitability: it's success in accumulating dollar balances on its own balance sheet. The Fed is the source of these dollar balances in the first place.
Yes, the Fed remits these earnings to the Treasury, so in principle they could be part of an expansionary program if the Treasury were expanding its pre-remittance deficit by an amount greater than the Fed's earnings. But it is not doing that. Instead it has been contracting its deficit. So the net outcome has been an overall liquid asset contraction. When the Fed's SOMA portfolio yields more in any given year than the Fed spends to add to that portfolio, then that is effectively just an alternative way of taxing the private sector.
Now I'm not opposed at all to increasing taxes on the financial sector if they are offset by expansionary increases in Treasury spending. But a net increase in the consolidated government balance sheet adds recessionary pressure to the economy."
OK, Dan imo is HIGHLY SKILLED in making the empirical case with words, if you will.... he may be THE MOST skilled person I have ever come across in this ability...
But, I dont think Gagnon and DeLong have the mathematical cognitive ability to match Dan in this regard and they dont get it... goes over their heads...
Wittgenstein: "[Philosophical problems] are, of course, not empirical problems;"
So this is NOT an empirical problem, Dan more than ably explains the empirical condition in his paragraph, which is observable and true, BUT our problem here is NOT empirical... we are NOT trying to come up with new knowledge... the system works as Dan explains very well here empirically... the system is functioning as designed... all transactions are accounted for, etc...
So as Wittgenstein asserts here, "[Philosophical problems] are, of course, not empirical problems; but they are solved through an insight into the workings of our language,"
So with Gagnon and DeLong here (I'm assuming both 'rubes' of some degree), we have to go at this through "the workings of our language..."
rsp,
"Fly in the bottle":
Dan is telling Delong and Gagnon: "just fly out the hole in top of the bottle..."
And they are like: "what hole?"
rsp,
Or even: "What's a hole?"
rsp,
Post a Comment