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‘This Is How Policy Mistakes Are Created’
On Tuesday, at an ECB event in Frankfurt, Adriana Kugler said she doesn't know the location of the neutral rate. What she does know -- or, more aptly, what she claims to know -- is that the Fed funds rate is currently "way above it."
I've been over this -- "this" being the logical fallacies Fed officials regularly traffic in when discussing r-star -- but I'm compelled to revisit the issue in light of the suddenly vociferous debate about what the Fed should do at its November policy meeting in c
Well here are some guides. Inflation now running 2-3%. Some central banks exclude imputed rent. Ours includes it. Fine funds are 4.75-5% That’s a real rate of 2-3%. Commodity prices are pretty stable. Dxy, the dollar is as well. Of course both fluctuate. Job growth is steady excluding if you average the last 3-6 months. Last month’s number way over, previous under. Yield curve was inverted until recently, but credit spreads are still pretty tight. Consumption growing steadily. The Fed cut 50, because they missed a 25 in July. The fact is that r* fluctuates too. So monetary policy, absent a crisis, works best as an iterative process. The balance of the data suggests funds are too high. But it’s not a slam dunk. So the Fed is right to ease slowly and reassess. Which pardon me, Larry Summers, chair of hindsight capital, is what the fomc is doing.
Virtually all economic and financial variables fluctuate, daily, hourly … You can’t actually say any number is actual except for an infinitesimal instant. Besides, according to the Heisenberg (him, too) Uncertainty Principle, measurement alters reality, so FOMC members should probably talk softly and stay out of sight.
“Hindsight Capital” – I like that, wish I could work there, feels low stress.
Hypothetical Neutral Rate is a wonderful straw man target to use for jawboning purposes.
I was just thinking about jawboning. It’s entirely possible that the Fed board is expressing their preferences for the upcoming presidential election by trying to jawbone the market up for one last burst of wealth effect and economic stimulus. If their tune changes dramatically after the election is over, I won’t be hugely surprised.
Their mandate is economic stability, since Orange presidency would most likely result in a loss of economic stability they would possibly be seen as within their mandate.
In addition personally, requiring each of them and their researchers to sign loyalty pledges to the Orange would likely not sit well in the stomach of a banker with a long and strong career.
I will be surprised if there is anyone who is not clear what an Orange repeat presidency would result in for journalists, news organizations, politicians, federal employees, judges, foreign policy, the poor, and taxation.
I cannot fathom what this woman is talking about. My wife and I went out to celebrate our 34th anniversary at a nice restaurant — using a gift card our sons had given us back in February — and struggled to navigate a menu where only two entrees were under $35. When we left (after a very enjoyable dinner, and my $43 halibut entree), we commented on how packed the place was. Two floors and some outside dining, almost full. On a Monday night. Restrictive? Gimme a break.
Unemployment is still trending down, they don’t want to be caught offside and help an tiny handed orange racist man. Furthermore, Hartnett might call out interest payments on the fake debt pile.