tag:blogger.com,1999:blog-4159906646513306121.post791102263608215379..comments2023-11-19T20:38:50.237-08:00Comments on Economic Logic: I do not understand US policyEconomic Logicianhttp://www.blogger.com/profile/10171296292101248614noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-4159906646513306121.post-57110265022524764402012-02-13T11:24:11.301-08:002012-02-13T11:24:11.301-08:00Go balls out on energy development including the p...Go balls out on energy development including the pipeline. But 'progressive' politics guised under 'saving the earth' keep us from acting like grown-ups. We've been talking about energy independence for 60 years and now its within our grasp but Obama won't pull the trigger. Who would have ever thunk?NormanBhttps://www.blogger.com/profile/05986709079442388236noreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-57784619820444504342012-02-11T15:51:43.075-08:002012-02-11T15:51:43.075-08:00Ten year inflation expectations - which are basica...Ten year inflation expectations - which are basically what matters for the Taylor Rule - are 1.39 percent: http://www.clevelandfed.org/research/Data/inflation_expectations/ . GDP is well below trend. Why on Earth would you not want to have loose monetary policy now? <br /><br />And "Bring interest rates back up, This will entice people and businesses to do something with all the cash they are sitting on"? This is nuts: we have people sitting on cash. Raising the interest rate on T-bills makes it more likely they will sit on the cash, not less likely. As far as infrastructure, I agree, though. It's crazy that the US has not built new transit/airports/power grids/etc. That said, net fiscal stimulus (not counting tax decreases), accounting for declines in state spending, is about zero over the recession...so it's not surprising you haven't seen any changes!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-37343975329353995252012-02-11T11:54:23.274-08:002012-02-11T11:54:23.274-08:00US economic policy does not make sense because we ...US economic policy does not make sense because we are past the midway point to the next presidential election. Not that it makes more sense at other times.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-351875434448556102012-02-11T10:42:54.834-08:002012-02-11T10:42:54.834-08:00There are positive signs in the economy, and the F...There are positive signs in the economy, and the Fed can amplify them by indicating that emergency measures are not needed anymore (or as much). There is something to self-fulfilling expectations.<br /><br />And besides, what if the potential output trend has indeed shifted and the Fed continues ignoring it. Are we going to stay with another decade of abnormally low interest rates? That cannot be healthy.Kansannoreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-43279365980757907712012-02-11T10:18:41.369-08:002012-02-11T10:18:41.369-08:00I am with you completely on the stimulus money. Wi...I am with you completely on the stimulus money. With the staggering amounts that were mentioned, one should have noticed something. Yet, except for a temporary boom in the road asphalting industry, I saw nothing.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-48040374348873074172012-02-11T10:17:05.400-08:002012-02-11T10:17:05.400-08:00Thanks Mark, I corrected the statement about infla...Thanks Mark, I corrected the statement about inflation and the Taylor rule. In any case, inflation is on target, thus the outcome of the statement remains valid.<br /><br />As for investment: we are in a situation where there is a surplus of liquidity because there is no interesting return in investment. Higher interest rates make investing interesting. I know, this may sound backwards.<br /><br />Also, the low interest rates keeps income low for retirees, and those have a high propensity to consume.Economic Logicianhttps://www.blogger.com/profile/10171296292101248614noreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-86291066551014695832012-02-11T10:02:50.642-08:002012-02-11T10:02:50.642-08:00"If you want to instill some confidence in th..."If you want to instill some confidence in the economy, you do not go about telling everyone the economy needs to stay in the emergency room three more years."<br /><br />I hardly think having the Fed just outright lie to everybody would fool many people.<br /><br />And I'm with Mark on the rest of the post.Michaelhttps://www.blogger.com/profile/15165380807772523078noreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-46671700127786871392012-02-11T09:42:12.432-08:002012-02-11T09:42:12.432-08:00You might want to rethink this claim:
"A Tay...You might want to rethink this claim:<br /><br />"A Taylor rule would call for low interest rates if inflation (or inflation expectations) are too high"<br /><br />I believe that's backwards.<br /><br />Also, if the S=I lines intersect at a negative i-rate, as it appears they do right now, all that raising interest rates will do is increase the gap between S and I. Raising interest rates *lowers* the incentive to invest since it represents the opportunity cost of investment -- you seem to imply it will increase it, but where's the evidence that an increase in interest rates increases investment? You can find pos. correlations in the data since better economies tend to have higher interest rates and higher investment, but that relationship is not causal.<br /><br />So raising interest rates reduces investment, and gives people an incentive to save even more. How can that cure a problem of too little investment relative the current volume of saving?<br /><br />Raising interest rates right now is not the answer.Anonymoushttps://www.blogger.com/profile/17782996871433352255noreply@blogger.com