Click to enlarge.
On the off chance we were to enter a recession while still in ZIRP, then what exactly would we expect the Fed to do?
Oh, wait. I forgot that it is common knowledge that the Fed has permanently put a stop to recessions. Never mind. Silly question.
Source Data:
St. Louis Fed: Custom Chart
http://www.nytimes.com/2013/10/27/business/economy/in-fed-and-out-many-now-think-inflation-helps.html?_r=1&
ReplyDelete(above)Frigging idiots :)
jshaef1
It is obvious that the Fed Funds Rate must go negative. I would try -0.5% at first and if that doesn't get the economy moving, try -1.0%.
ReplyDeleteBanks have $2.2 trillion in excess reserves that could be put to use if the rate was negative. A negative rate would also lower mortgage rates and other yields, and boost bond prices.
Why doesn't the Fed see the positives in negatives?
jshaef1,
ReplyDelete1. Many households also have reason to miss higher inflation. Historically, higher prices have led to higher wages...
2. Rising prices allows companies to increase profit margins quietly, by not raising wages, which in turn makes it profitable for companies to hire additional workers.
That's what I like most about inflation. It offers a little something for everyone.
Mr Slippery,
ReplyDeleteIt is obvious that the Fed Funds Rate must go negative. I would try -0.5% at first and if that doesn't get the economy moving, try -1.0%.
Nice. Worst case, try -100.0%. It's clean. Hardly no math is required.
What you got? This.
What you want? All of this.
Perfect!
That's what I like most about inflation. It offers a little something for everyone.<<
ReplyDeleteEspecially TIP holders, I suppose :).
If they just adjust inflation measures to 1980 standards, we be good.
Nice. Worst case, try -100.0%. It's clean. Hardly no math is required.<<
Is that also called the "debt jubilee" Oh the humanity!!
jshaef1
jshaef1,
ReplyDeleteHolders of TIPS (such as myself) should not be rooting for high inflation. All it would mean is heavy taxation on our inflationary gains. Fortunately, that has not been a problem so far. If ZIRP can't even get oil back to $145+ then what can?
Is that also called the "debt jubilee" Oh the humanity!!
Jubilee Debt Coalition
Jubilee Debt Coalition (Drop The Debt) is a coalition of national organisations and local groups around the UK, calling for the unpayable debts of the poorest countries to be cancelled.
We can't have the jubilee until we're poor enough! Keep the faith though! We're working on it, lol. Sigh.
If there is a recession in ZIRP the Fed will first buy S&P futures; then all the securities in the S&P and after it owns every multinational it can charge what it wants for not only products but stocks. Imagine the asset bubbles and price inflation the Fed can achieve when it dominates all markets! Plus under Dodd-Frank it becomes the Regulatory Overlord so it can do whatever it wants to achieve the overarching goal of "financial stability" aka nothing but profits for TBTF.
ReplyDeletedd,
ReplyDeleteOperation Stock Market Garden and Operation Regulatory Overlord will win the war on recessions!
Genius!
How much does that chart reflect the loss of department store sales to internet sales (Amazon.com)?
ReplyDeleteFritz_O,
ReplyDeleteIn theory, could be close to 100% more or less.
Department Stores vs. Nonstore Retailers: A Zero Sum Game