tag:blogger.com,1999:blog-8515247115132134144.post6264591957731400573..comments2024-02-17T12:34:01.400-08:00Comments on Illusion of Prosperity: What to Expect From Janet Yellen's Fed (Musical Tribute)Stagflationary Markhttp://www.blogger.com/profile/04568993350246477976noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-8515247115132134144.post-2481755533239089902014-01-29T22:51:08.016-08:002014-01-29T22:51:08.016-08:00Charles Kiting,
Let's just shift all the goal...Charles Kiting,<br /><br />Let's just shift all the goal posts to the 50-yard line and call it good! ;)Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-44387948522351621072014-01-29T13:18:51.848-08:002014-01-29T13:18:51.848-08:00Quantitative Easing is too beaucoup.Quantitative Easing is too beaucoup.Charles Kitingnoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-79435938429587921372014-01-29T13:17:49.044-08:002014-01-29T13:17:49.044-08:00Haven't they already shifted the goalposts? I...Haven't they already shifted the goalposts? I thought ZIRP was going to end when UE looked better, and now they've transferred the better UE to be a trigger on how they handle QE.Charles Kitingnoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-90537303984248522382014-01-29T10:57:30.441-08:002014-01-29T10:57:30.441-08:00Nathan,
In particular, it strikes me as odd that ...Nathan,<br /><br /><i>In particular, it strikes me as odd that many things that are positive for GDP growth are neutral to negative for individual happiness.</i><br /><br />Yeah, both war and hurricanes add to GDP, as does cancer. Go figure.<br /><br /><i>For example, there are a lot of two income households where the lesser income is basically breakeven after considering additional costs...</i><br /><br />I would add the following risk that few talk about.<br /><br />In the past, if the father lost his job the mortgage was at risk. With unemployment at 10%, that's about a 10% risk.<br /><br />In the present, if either the father or the mother loses a job the mortgage is at risk. With unemployment at 10%, that's about a 19% risk (0.9 x 0.9 = 0.81, the chance of neither being unemployed).<br /><br />And some wonder why the housing bust was so severe! Rather than having two incomes and treating the second as a safety buffer, the incomes were combined to buy a bigger house. Instead of reducing stress and risk by having two people work, stress and risk were increased!Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-70964954948139339092014-01-29T10:38:10.803-08:002014-01-29T10:38:10.803-08:00I agree. AFAICT QE/ZIRP is analogous to free drin...I agree. AFAICT QE/ZIRP is analogous to free drinks in the casino - it encourages more people to play the game but doesn't change the expected value of the outcome.<br /><br />I think the real problem is that the Fed is operating with the concept of prosperity. In particular, it strikes me as odd that many things that are positive for GDP growth are neutral to negative for individual happiness. For example, there are a lot of two income households where the lesser income is basically breakeven after considering additional costs (e.g. day care, transportation, etc.) and marginal tax rates, nevermind the additional stress. It seems rather perverse for the government to prefer more jobs of that sort.<br /><br />In general, it seems like GDP is just a measure of how financialized a society has become, how many transactions happen outside the household, and how much economic activity is subject to taxation. Nation states have a reason to care about GDP, but individuals don't.Nathannoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-71666078420128543162014-01-29T08:46:16.981-08:002014-01-29T08:46:16.981-08:00Nathan,
I hear you.
For what it is worth, my fav...Nathan,<br /><br />I hear you.<br /><br />For what it is worth, my favorite healthy economic indicator is that we don't have an inverted yield curve (often an indication of impending doom).<br /><br />Of course, pegging the short-term yields to 0% with ZIRP has a LOT to do with that!<br /><br />So is the situation really healthy? Or is it like painting a smiley face over the heart rate monitor in an intensive care unit? What you can't see, can't hurt you! ;)<br /><br />If the stock market continues to struggle in 2014, it will call into question the sustainability of this virtuous prosperity cycle (and just how omnipotent the Fed really isn't). I've been questioning it since 2004. Over the long-term, I don't think the Fed can create all that much real prosperity (if any).Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-59178205676802463992014-01-29T08:05:35.830-08:002014-01-29T08:05:35.830-08:00I doubt the Fed (or BoE) will emphasize a new targ...I doubt the Fed (or BoE) will emphasize a new target. The old target was really just political cover for the policy they wanted to implement.<br /><br />If UE drops to 6% (or less) for a brief period of time it's going to force the Fed to 1) abandon ZIRP/QE or 2) acknowledge the UE3 isn't really an important measure of the economy.<br /><br />The Fed is in a tough place because nearly all economic indicators they would point at for political cover (UE, bond spreads, stock market, housing prices, etc.) are all relatively healthy (if not bubble territory).Nathannoreply@blogger.com