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
- 10-15-2024, 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
- 10-15-2024, 07:44 PM
- Precious_b
- 10-15-2024, 07:48 PM
OMG! There was a run on the Bank today. NOT!
- Texas Contrarian
- 10-17-2024, 02:09 PM
OMG! There was a run on the Bank today. NOT! Originally Posted by Precious_bNon sequitur.
No one has said anything about bank runs or expressed any concern that they're a risk, especially in view of the FDIC's 2023 intimations that all deposits will be covered; not just those exceeding the statutory limits. (See: First Republic Bank, Signature Bank, and Silicon Valley Bank.)
In other news, the ECB announced earlier today that it was joining the rate-cutting party, coming in with a 25-bipper.
- lustylad
- 10-17-2024, 02:25 PM
OMG! There was a run on the Bank today. NOT! Originally Posted by Precious_b
(See: First Republic Bank, Signature Bank, and Silicon Valley Bank.) Originally Posted by Texas ContrarianLet's hope Precious_b didn't have any biggy deposit accounts in those 3 failed institutions. Even though most depositors were made whole, it can be a PITA to have to work with the FDIC to recover your money.
- Precious_b
- 10-17-2024, 05:35 PM
It's safe under my mattress LL. 
- Texas Contrarian
- Yesterday, 01:54 PM
Precious_b, I certainly hope you haven't left all that cash under your mattress for very long, for it would have lost a large portion of its purchasing power over the last three years.
Since the topic of this thread is whether the Fed "sees something" that caused policymakers to go for a 50-bip cut, I might mention a couple of points to ponder for those interested in the issue.
The latest reports on international capital flows suggest that foreign central bank purchases of new Treasury issuance have markedly slowed over the last couple of months, leaving it up to other institutions and individuals to sustain demand for US debt.
Meanwhile, the government rolls along, continuing to run fiscal deficits of nearly $2 trillion annually, or about 7% of GDP.
Not only that, but our two presidential candidates are vying to show that they can be even more fiscally irresponsible than their opponent by promising all manner of additional tax cuts, subsidies, and other free candy. Our ridiculously unserious candidates couldn't care less about our ballooning federal debt. (It's the campaigning season! Free ice cream for everyone. The fat guy down the street will eat your spinach for you!)
Since interest payments on the federal debt have surged past the trillion-dollar mark, Fed officials naturally would like to suppress interest rates as much as may be practicable in order to reduce the deficit by at least a little bit.
In my view, the most serious public policy imperative over the next 5-10 years is not inflation or unemployment. Though serious concerns, they are by comparison transitory problems; not structural ones.
The gorilla sitting right in the middle of the living room is our gargantuan federal debt and the fact that no one is going to do so much as even lift a finger in an effort to do a damn thing about it until absolutely forced.
Since the topic of this thread is whether the Fed "sees something" that caused policymakers to go for a 50-bip cut, I might mention a couple of points to ponder for those interested in the issue.
The latest reports on international capital flows suggest that foreign central bank purchases of new Treasury issuance have markedly slowed over the last couple of months, leaving it up to other institutions and individuals to sustain demand for US debt.
Meanwhile, the government rolls along, continuing to run fiscal deficits of nearly $2 trillion annually, or about 7% of GDP.
Not only that, but our two presidential candidates are vying to show that they can be even more fiscally irresponsible than their opponent by promising all manner of additional tax cuts, subsidies, and other free candy. Our ridiculously unserious candidates couldn't care less about our ballooning federal debt. (It's the campaigning season! Free ice cream for everyone. The fat guy down the street will eat your spinach for you!)
Since interest payments on the federal debt have surged past the trillion-dollar mark, Fed officials naturally would like to suppress interest rates as much as may be practicable in order to reduce the deficit by at least a little bit.
In my view, the most serious public policy imperative over the next 5-10 years is not inflation or unemployment. Though serious concerns, they are by comparison transitory problems; not structural ones.
The gorilla sitting right in the middle of the living room is our gargantuan federal debt and the fact that no one is going to do so much as even lift a finger in an effort to do a damn thing about it until absolutely forced.
- eccieuser9500
- Yesterday, 03:23 PM
- eccieuser9500
- Yesterday, 03:25 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.
Stay out of trouble LL, it would be great to have you around for a while. Originally Posted by Tiny
It's great to be back. To showcase the other side of the brain.
I'll try to stay out of trouble as well.
- The_Waco_Kid
- Yesterday, 04:31 PM
Are those many at all versed in monetary policy or economics or are just folks that watch NesMax and Fox and read from TownHall or other right wing outlets and think someone giving them political spin is actually informing them? Originally Posted by 1blackman1
I suppose we'll see who's right, though I already know the answer. Hint, it ain’t Trump or NewsMax/Fox. Originally Posted by 1blackman1
you claims are opinion not fact, in fact they are as biased as you claim Fox, Townhall and NewsMax are.
who knew?
this forecast is somewhat optimistic. but forecasts are like weather forecasts yeah?
https://www.conference-board.org/research/us-forecast
The Conference Board Economic Forecast for the US Economy
October 11, 2024
US Economy Displays Continued Resilience
US economic data continue to surprise to the upside, revealing ongoing resilience despite looming uncertainties and persistent shocks. We now expect real GDP to expand by 2.5 percent year-over-year in 2024, an upward revision from 2.4 percent. Some moderate growth at yearend and early next year may constrain annual 2025 growth to 1.7 percent despite expectations of stronger quarterly annualized growth over the course of that year. Slowing inflation and a healthy labor market should support measured interest rate cuts over the course of the next year, lowering the Fed Funds rate target range to 3.00-3.25 percent in 2025.
Second-half Growth Tracking Exceeding Expectations
Real GDP growth for Q3 2024 is revised up to 1.8 percent Q/Q annualized from a lackluster 0.8 percent in prior forecasts. The upgrade to real GDP growth largely reflects evidence of stronger spending, increased after-tax income, and higher savings among US households, as well as a healthy labor market that continues to support consumption. Additionally, an influx of imports in anticipation of the East- and Gulf-Coast port strike likely boosted inventories, offsetting some of the expected net exports drag.
- 1blackman1
- Today, 07:10 AM
Yet I was correct. Unlike the biased right wing media making claims that were incorrect.