It’s great to see the big guns, Texas Contrarian and Lusty Lad, posting in the same thread about economic policy again. I read a little about the Cochrane / Krugman wars last night and it’s just like some of the threads about the economy in the eccie political forum! Except other than the two aforementioned individuals we’re not on the same level.
Stay out of trouble LL, it would be great to have you around for a while.
- Tiny
- 09-24-2024, 08:19 AM
- lustylad
- 09-24-2024, 06:04 PM
It’s great to see the big guns, Texas Contrarian and Lusty Lad, posting in the same thread about economic policy again. I read a little about the Cochrane / Krugman wars last night and it’s just like some of the threads about the economy in the eccie political forum! Except other than the two aforementioned individuals we’re not on the same level.Thanks, tiny. I'd love to stick around if the mods assent. You wouldn't believe some of the stuff I've been pointed for. Not a good look for me to complain, so I'll leave it at that.
Stay out of trouble LL, it would be great to have you around for a while. Originally Posted by Tiny
I have been collecting my thoughts on our 2 famous threads, the ones you recently bumped. Hope to get a good discussion or two going once I post in them.
- lustylad
- 09-24-2024, 06:26 PM
In my view, it's simply too early to tell, though I believe the risk of impending slowdown/recession with rising unemployment is significantly greater than the risk of a serious inflation resurgence. Originally Posted by Texas ContrarianThere's no slowdown apparent in the GDP data ... yet.
The BEA (US Bureau of Economic Analysis) put the Q2 growth of real GDP at 3.0% (annualized) and the Atlanta Fed's current GDPNow estimate of Q3 growth is 2.9%.
Does it seem odd to you that Kamala doesn't brag about, or even mention, any of this? I can't figure out whether it's because 1) she is an economic illiterate who doesn't understand what a good/bad GDP number looks like, 2) she doesn't have any decent economists on her campaign staff to explain it to her, or 3) as Larry Kudlow alleges, she is a far-left San Francisco socialist who has an aversion to the word "growth" when it comes to the US economy.
The reason I don't think inflation is that much of a risk going forward is that the spike of a couple of years ago was quite a bit different animal from the "Great Inflation" of the 1970s-early'80s... Originally Posted by Texas ContrarianI agree - it's a completely different animal today compared with the inflation Jimmy Carter unleashed upon our economy back then. However, I'm not convinced yet that it has stabilized at or below the Fed's 2.0% target range.
Btw - the predictions you made here two years ago that inflation was peaking and would decline fairly rapidly look pretty spot-on in retrospect. Of course, it helps to avoid timelines when making such prognostications. I'm still chuckling at Janet Yellen's insistence that "inflation is transitory". How long is "transitory"? My erections are transitory. Come to think of it, didn't Keynes famously say "in the long run we're all transitory"? Or something like that.
More later.
- Tiny
- 09-24-2024, 07:35 PM
- Texas Contrarian
- Yesterday, 09:25 AM
A few updated observations on the Fed's thinking:
In view of the fact that the current CPI inflation rate has still not been decisively hammered down to the 2.0% target level, why did they decide on a 50-bip cut last month? After all, the long-and widely-anticipated recession keeps on not happening.
But I'm still in the camp that believes the risk of recession commencing within the next 12-18 months is higher than another inflation breakout, since headline inflation receded more or less concomitantly with the drawdown of household bank accounts following multitrillion-dollar covid relief/stimulus measures.
During the first half of 2023, there was widely expressed concern about the risks to loan portfolios of midsized regional banks by 2025, given that banks in the sub-$200-billion asset range hold the bulk of commercial real estate loans, and that many of these loans are variable-rate and would very likely shackle many property owners with unserviceable debt and banks with nonperforming loans. (More bailouts, here we come!)
Then there's what's called the "neutral interest rate," which is the subject of much debate, but which many students believe now is somewhere around 3.5% (nominal.) The policy rate is now 1.25-1.5% above that. Unless there is some really compelling reason not to do so, is there any reason that the Fed shouldn't begin the process of "normalization?"
Yes, we're not quite at the vaunted 2% "target" rate. However, I would note that even Paul Volcker, almost everyone's idea of an inflation-fighting superstar, never got the inflation rate to the 2% mark (except for the outlier year of 1986).
Of course, the decision as to whether the 50-bip cut was wise is certainly arguable, but my take on recent discussions of the issue is that the above considerations entered into Fed official's thinking over the last couple of months or so.
As to the question of how long is transitory -- in the case of the recent inflation breakout, I suspect that although it was quite transitory compared with the "Great Inflation" of the 1970s, it may not have been as "transitory" as Ms. Yellen hoped.
My erections are quite transitory too, by the way. My primary SB is a very effective inflation-fighter in that regard. It helps, too, that (thankfully for me!) she's in the opposite tail from Ms. Yellen in the physical attractiveness distribution. Her inflation remedy is always quick and pleasant.
If you ever take Viagra and your ensuing erection lasts more than four hours and thus is not sufficiently transitory, you are urged to call your doctor, according to warnings issued by the maker in the early days.
This prompted one of the late-night comedians to say something like this:
"The warning on the package says to call your doctor if you have an erection lasting more than four hours after taking this medication. To hell with that! If I have an erection that lasts for more than four hours, I'm not calling my doctor. I'm calling everybody!"
In view of the fact that the current CPI inflation rate has still not been decisively hammered down to the 2.0% target level, why did they decide on a 50-bip cut last month? After all, the long-and widely-anticipated recession keeps on not happening.
But I'm still in the camp that believes the risk of recession commencing within the next 12-18 months is higher than another inflation breakout, since headline inflation receded more or less concomitantly with the drawdown of household bank accounts following multitrillion-dollar covid relief/stimulus measures.
During the first half of 2023, there was widely expressed concern about the risks to loan portfolios of midsized regional banks by 2025, given that banks in the sub-$200-billion asset range hold the bulk of commercial real estate loans, and that many of these loans are variable-rate and would very likely shackle many property owners with unserviceable debt and banks with nonperforming loans. (More bailouts, here we come!)
Then there's what's called the "neutral interest rate," which is the subject of much debate, but which many students believe now is somewhere around 3.5% (nominal.) The policy rate is now 1.25-1.5% above that. Unless there is some really compelling reason not to do so, is there any reason that the Fed shouldn't begin the process of "normalization?"
Yes, we're not quite at the vaunted 2% "target" rate. However, I would note that even Paul Volcker, almost everyone's idea of an inflation-fighting superstar, never got the inflation rate to the 2% mark (except for the outlier year of 1986).
Of course, the decision as to whether the 50-bip cut was wise is certainly arguable, but my take on recent discussions of the issue is that the above considerations entered into Fed official's thinking over the last couple of months or so.
How long is "transitory"? My erections are transitory. Come to think of it, didn't Keynes famously say "in the long run we're all transitory"? Or something like that. Originally Posted by lustyladKeynes did indeed say that in the long run we're all ... (Well, something. Since I'm 74, I don't like to think about it!)
As to the question of how long is transitory -- in the case of the recent inflation breakout, I suspect that although it was quite transitory compared with the "Great Inflation" of the 1970s, it may not have been as "transitory" as Ms. Yellen hoped.
My erections are quite transitory too, by the way. My primary SB is a very effective inflation-fighter in that regard. It helps, too, that (thankfully for me!) she's in the opposite tail from Ms. Yellen in the physical attractiveness distribution. Her inflation remedy is always quick and pleasant.
If you ever take Viagra and your ensuing erection lasts more than four hours and thus is not sufficiently transitory, you are urged to call your doctor, according to warnings issued by the maker in the early days.
This prompted one of the late-night comedians to say something like this:
"The warning on the package says to call your doctor if you have an erection lasting more than four hours after taking this medication. To hell with that! If I have an erection that lasts for more than four hours, I'm not calling my doctor. I'm calling everybody!"
- txdot-guy
- Yesterday, 07:44 PM
- Precious_b
- Yesterday, 07:48 PM
OMG! There was a run on the Bank today. NOT!