tag:blogger.com,1999:blog-2761684730989137546.post3226413766956425207..comments2024-03-28T04:13:36.779-04:00Comments on Mike Norman Economics: Rate hikes ARE helicopter money. But the "geniuses" don't even understand that.mike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger27125tag:blogger.com,1999:blog-2761684730989137546.post-49736777746553502252016-09-13T12:51:48.726-04:002016-09-13T12:51:48.726-04:00I,
That's also a function of withdrawals (an...I, <br /><br />That's also a function of withdrawals (and prices).... Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-74748543903342117532016-09-13T09:25:33.535-04:002016-09-13T09:25:33.535-04:00https://fred.stlouisfed.org/series/CRDQUSAPABIS
T...https://fred.stlouisfed.org/series/CRDQUSAPABIS<br /><br />This is what has been pushing up "growth" (at diminishing productivity rates!). A minor drop in the growth rate of debt and the system collapses, hilariously malfunctioning system (take into account the "inflation" rate is not keeping up).Ignaciohttps://www.blogger.com/profile/16082008115484199316noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-61936660945283926562016-09-13T09:17:06.810-04:002016-09-13T09:17:06.810-04:00Balance sheet is ex post.. nothing can "depen...<i>Balance sheet is ex post.. nothing can "depend" on a ex post result think about the time domain here ... </i><br /><br />You understood what i mean... depends on how much debt vs. financial savings there are.<br /><br />There are trillions in credit outstanding, and the distribution of equity and credit outstanding is INEQUAL (that's all the fuss about inequality is about). You are missing elephants in the room.Ignaciohttps://www.blogger.com/profile/16082008115484199316noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-91505451552882719432016-09-13T08:59:00.926-04:002016-09-13T08:59:00.926-04:00Get Mike's latest report he has total Federal ...Get Mike's latest report he has total Federal Salaries at $160B so every one point raise will increase ERISA accounts by in excess of the the total of current Federal Salaries...<br /><br />Its almost like doubling the size of the current Federal workforce....<br /><br />Obama got screwed big league with this ZIRP for his whole 8 years... first potus ever...Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-1924203861926484252016-09-13T08:49:28.489-04:002016-09-13T08:49:28.489-04:00One half of one percent of $19T is $95B....
Every...One half of one percent of $19T is $95B....<br /><br />Every one percent is $190B....Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-16714125116943446842016-09-13T08:44:27.594-04:002016-09-13T08:44:27.594-04:00Ignacio there is 19T in ERISA accounts here so the...Ignacio there is 19T in ERISA accounts here so the "average" savings of individuals directly might be $2k but there is a lot more than that in accounts on individuals behalf....<br /><br />It also effects the finances of state and local govts over here as those non-federal but still public institutions guarantee the shortfalls in the ERISA pensions of their employees... that is a big part of the 19T in ERISA... <br /><br />Any raises are going to have a positive effect .... And if it really gets rolling they are going to keep raising imo....Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-25386631013840199212016-09-13T08:09:38.842-04:002016-09-13T08:09:38.842-04:00" net effect depends on the balance sheet &qu..." net effect depends on the balance sheet "<br /><br />Balance sheet is ex post.. nothing can "depend" on a ex post result think about the time domain here ... this is the mistake the SFC "models" people make... its still mathematically "trial and error" because we dont have a functional equation we are using and then examining derivative action of that functional equation...<br /><br />Maybe like this:<br /><br />X = f(W)<br /><br />where W is Treasury withdrawals....<br /><br />ie<br /><br />Taxes = f(W)<br /><br />Savings = f(W)<br /><br />Bank Credit = f(W)<br /><br />For a numismatic system like we have now....<br /><br />Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-58815545142612494062016-09-13T07:27:12.981-04:002016-09-13T07:27:12.981-04:00The net effect depends on the balance sheet compos...The net effect depends on the balance sheet composition and distribution of the private sector.<br /><br />If household balance sheets are relatively strong then it would be good, if there is more credit outstanding then no.<br /><br />Take in mind the average american does have less than $2K in savings and is one paycheck away from poverty and usually net liquid equity is negative (discounting real estate assets for example). Those with net savings would benefit, those with higher debt wouldn't.<br /><br />Then there is the multipliers, if those with savings would spend more because their disposable income increases and that would help boosting aggregate demand and increase wages that could help indirectly those who have a worse equity position.<br /><br />The answer is not a straightforward "good or bad (on aggregate)", there are like a 100 variables influencing the outcome. If the FED is really data driven (don't think so), they would base their decisions on all those variables. I doubt they have the manpower and brainpower (is not trivial to be fair) to come with a decent model, hence falling on whatever absurdity like ISLM.<br /><br />In any case: interest rates are still an awful tool for directing any kind of policy (monetary or otherwise). Falling on that is because all the non sense dominant monetarism and central banking religiousness.Ignaciohttps://www.blogger.com/profile/16082008115484199316noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-53934558026178543222016-09-13T07:10:47.427-04:002016-09-13T07:10:47.427-04:00Ralph to me it's like you have one foot in the...Ralph to me it's like you have one foot in the MMT camp but still one foot in the monetarists camp....Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-60312791247612013302016-09-13T07:08:06.828-04:002016-09-13T07:08:06.828-04:00Ralph they think the higher rates themselves have ...Ralph they think the higher rates themselves have the "deflationary!" effect... <br /><br />And they don't look at increased interest income as potentially "inflationary!" No economics theory even looks at that at all ... It's all monetarists there.... They look at M1, M2, reserve balances etc.....<br /><br />If they see any "inflation!" start to develop they will increase rates and maybe reduce reserve balances period this is their playbook.... And they will stick to it...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-82322983221469885492016-09-13T06:53:45.702-04:002016-09-13T06:53:45.702-04:00Random,
That’s an interesting article by Hetecono...Random,<br /><br />That’s an interesting article by Heteconomist which I think I’ve absorbed (???). <br />The central point the article makes is that if the Treasury wants to spend more and fund that via more borrowing, and if the Fed “…is targeting a positive short-term interest rate”, then the Fed must supply the market with new reserves to enable the latter borrowing (else interest rates will rise).<br /><br />But the situation we’re discussing is where the Fed DOES WANT interest rates to rise.<br /> <br />So…back to the initial question, i.e. does an interest rate rise equal helicoptering? My answer is that the extra interest rate payments COULD BE funded from freshly issued reserves, but the Fed just won’t do that to any great extent precisely because it wants to impose a deflationary effect. I.e. the Fed will say to the Treasury, “extra money you need to pay interest on extra borrowing, or rolled over Treasuries will just have to come from tax”.Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-76800518377376834902016-09-13T03:59:42.644-04:002016-09-13T03:59:42.644-04:00"When you look at firms, I think, one of the ..."When you look at firms, I think, one of the things that we teach people, and will continue to teach people, is that interest rates matter. There is enormous discussion of interest rates. They do matter for the distribution of income but nobody has ever been able to detect an interest rate effect on demand for investment or household savings. That risk perceptions dominate among institutions, their concerns in making investment decisions. And you have to teach people that and forget about the "r" variable that you have in your models and I'm not optimistic that that's going to happen. What that means in turn is that when you talk about monetary policy you cannot talk about it in the abstract. Monetary institutions matter a lot. The institutional form of banking systems matter a tremendous amount. I think it's fair to say that across the world, whether it's Abenomics, the European Central Bank or the US Fed, there is no significant evidence that they've had a positive effect. In fact, how they defend themselves is "ohh, if we hadn't done this we would have had a depression". But again you can look at countries that didn't do it and they didn't have depressions. Sucessful monetary interventions with the institutions we now have in place do not look like traditional monetary policy. They look like what the Swedes did in the middle 1990s when they had a tremendous problem, what the Koreans did in the wake of the Asian crisis, which is direct recapitalization of the banks." <br />https://www.facebook.com/notes/joseph-e-stiglitz/bruce-greenwald-the-shadow-joe-stiglitz-on-interest-rates-and-monetary-policy/692222450791460/<br />Postkeyhttps://www.blogger.com/profile/11747509012748106827noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-40250871159461431682016-09-12T14:09:38.495-04:002016-09-12T14:09:38.495-04:00Ralph maybe this way:
Christen-dumb: Tri-party a...Ralph maybe this way:<br /><br />Christen-dumb: Tri-party arrangement<br /><br />Econo-dumb: Bilateral arrangement<br /><br />Try to think about these switched around...Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-61782283151659997162016-09-12T13:51:57.989-04:002016-09-12T13:51:57.989-04:00Ralph:
http://heteconomist.com/exercising-currenc...Ralph:<br /><br />http://heteconomist.com/exercising-currency-sovereignty-under-self-imposed-constraints/Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-19154284748521984892016-09-12T13:23:40.504-04:002016-09-12T13:23:40.504-04:00Ralph you are ignoring Dealer role and associated ...Ralph you are ignoring Dealer role and associated Dealer inventory in the process...Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-59838440206196784652016-09-12T13:13:45.556-04:002016-09-12T13:13:45.556-04:00Higher rates or another big war?
Which ones will ...Higher rates or another big war?<br /><br />Which ones will you guys have?<br /><br />Put me down for the former....Matt Frankohttps://www.blogger.com/profile/11082502216984169113noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-783629071888652462016-09-12T13:07:08.724-04:002016-09-12T13:07:08.724-04:00Banks still seek deposits so they advertise their...Banks still seek deposits so they advertise their deposit rates they pay... Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-17608747981089674702016-09-12T13:04:21.491-04:002016-09-12T13:04:21.491-04:00Random,
Obama is going to go down as first potus ...Random,<br /><br />Obama is going to go down as first potus in history of CB era to have had ZIRP his whole 2 terms.... He got screwed royally.... Too stupid to figure it out .... So is Trump....Matt Frankohttps://www.blogger.com/profile/11978352335097260145noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-55428814783454753322016-09-12T12:45:31.140-04:002016-09-12T12:45:31.140-04:00Random,
Re your claim that interest on Treasuries...Random,<br /><br />Re your claim that interest on Treasuries comes from "crediting bank accounts", that would be one way of doing it. But that's not actually how it's done is it? I.e. the Treasury / government cannot just print money: only the Fed can do that. Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-56995939378444794452016-09-12T12:32:30.906-04:002016-09-12T12:32:30.906-04:00But - in the present context of monetary policy - ...But - in the present context of monetary policy - "higher interest rates" will mean higher IOR.<br /><br />So, the first beneficiaries of the hike will be the banks, who are awash in reserves deposited at the Fed.<br /><br />Of course, the hike will be then "transmitted" to higher rates on T-bills, the prime rate, rates on long-term bonds, etc. <br /><br />However, the fact that the banks will be the first agents to benefit from the move may throw some doubts about the stimulative nature of the rate hikes - right?Jose Guilhermehttps://www.blogger.com/profile/00313496015841693181noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-30733667370827650562016-09-12T12:13:12.466-04:002016-09-12T12:13:12.466-04:00The question is how much would flow to spending, s...The question is how much would flow to spending, since interest payments are deposits. Government spending, on the other hand, is spending, except for transfers, but they are targeted toward the bottom where consumption greatly exceeds saving.<br /><br />Interest payments are helicopter money, which is fiscal in the sense of increasing $NFA. But helicopter money is no the same as fiscal expenditure in that it is not targeted toward spending. <br /><br />Probably a lot of it would be saved in various financial instruments, driving up assets prices, so in that sense it is bullish.Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-41053482865206979312016-09-12T11:46:26.574-04:002016-09-12T11:46:26.574-04:00"First the money is taken."
Right. But ..."First the money is taken."<br /><br />Right. But it's nice to get it back.mike normanhttps://www.blogger.com/profile/03296006882513340747noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-47785042746729256832016-09-12T11:45:43.911-04:002016-09-12T11:45:43.911-04:00The initial effect is a speeding up of purchase an...The initial effect is a speeding up of purchase and investment plans, just like in an inflationary environment. This is well established. The multipliers may impede later on, but not initially. Furthermore, with household debt burdens at 40-year lows, the scope for a significant increase in debt accumulation is very real.mike normanhttps://www.blogger.com/profile/03296006882513340747noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-50250656342970721212016-09-12T11:07:47.875-04:002016-09-12T11:07:47.875-04:00Like everything, there are tradeoffs. Higher rates...Like everything, there are tradeoffs. Higher rates mean higher borrowing costs affecting margin and mortgages. What are the multipliers?Tom Hickeyhttps://www.blogger.com/profile/08454222098667643650noreply@blogger.comtag:blogger.com,1999:blog-2761684730989137546.post-10182091851697446352016-09-12T10:50:56.587-04:002016-09-12T10:50:56.587-04:00"way of interest, but against that, the money..."way of interest, but against that, the money for that interest comes out of taxes."<br /><br />Nope. It is paid by crediting bank accounts like ALL spending.<br /><br />"So the private sector has less money."<br /><br />Why would swapping one "bank vault" with any other matter. It is SPENDING that matters.Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.com