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Really, really sounds like the right solution is to raise taxes.
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Oct 26, 2023 18:50
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Lockback posted:Really, really sounds like the right solution is to raise taxes. Yep, its insane that we're trying to manage this entire thing with one monetary lever, because the fiscal side is stuck on "wide loving open"
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Oct 26, 2023 19:47
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I like that the lever is "gently caress up the housing market" and the market reaction to that is "we'll just build slightly smaller mcmansions" because housing is so bad that people are still lining up to buy houses at 8% No way Congress decides to get involved in raising taxes in an election year
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Oct 26, 2023 22:54
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Lockback posted:Really, really sounds like the right solution is to raise taxes. My vote is for increased immigration. Increased production with the added bonus is of remittances would smack inflation where it hurts. ^^ interest rates are important for housing but for every other sector that uses debt financing as well.
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Oct 27, 2023 00:30
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Loosening up immigration would firm up a lot of the unskilled entry level job vacancies. It would also crush the "fight for $Fifteen" labor movement Also apparently hardly any high school kids have jobs anymore. In high school 20+ years ago everyone had one job, and if you had a big family often you had two jobs, or at least mowed lawns on the side These are from a vox article from 2014  
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Oct 27, 2023 00:52
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Hadlock posted:Also apparently hardly any high school kids have jobs anymore. In high school 20+ years ago everyone had one job, and if you had a big family often you had two jobs, or at least mowed lawns on the side Here are those two data series since: https://fred.stlouisfed.org/series/LNS14000012 https://fred.stlouisfed.org/series/LNS12300012 Which is kind of interesting in that it implies that there wasn't a huge change in teenage behavior compared to say, the early 2000s, just that the post-GFC recovery was freaking awful. In 2021 if you were a late teen looking for a job you'd have to literally go back to the 1950's to find a better environment.
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Oct 27, 2023 01:03
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Looking at FRED, 4.9% compounded annual rate of change (CARC) doesn't look that exceptional. I can't find how exactly FRED calculates it, but it looks to be a bit wonky due to real spikes both way due to COVID stuff. I'm not sure it is a good predictor of 'recession averted', it could just be the large downward COVID spike falling off, while the large upward spike is still included. Real GDP YOY is 2.9%, which is unremarkable. https://fred.stlouisfed.org/series/GDPC1 (You gotta change the units to compounded annual rate of change and/or percent change from year ago.)
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Oct 27, 2023 15:28
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Boot and Rally posted:Looking at FRED, 4.9% compounded annual rate of change (CARC) doesn't look that exceptional. I can't find how exactly FRED calculates it, but it looks to be a bit wonky due to real spikes both way due to COVID stuff. I'm not sure it is a good predictor of 'recession averted', it could just be the large downward COVID spike falling off, while the large upward spike is still included. Real GDP YOY is 2.9%, which is unremarkable. real gdp growth of 3% is a huge outlier among developed nations which mostly count themselves lucky to get 1%. It's far above most economists's predictions for the past year. If you said a year ago you expected 3% real growth you would have got laughed out of the room. People would have called you a propagandist for biden and the fed. It's very much remarkable. in the context of 3% annual growth, a 5% quarter isn't huge, since there's more variance over shorter time spans. but 3% is already a headline figure. it's a minor miracle and defies orthodox economics.
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Oct 27, 2023 16:11
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I thought we established at the beginning of the pandemic that in addition to real estate, financial investors were doing "flight to quality" for cash as well https://wkzo.com/2023/10/09/us-treasury-futures-rise-on-flight-to-quality-cautious-fed-speak/ Seems like everyone wants to hold US dollars any time investors get spooked these days. Third world currencies took a giant dump at the beginning of lock down too Presumably with all that cash being pushed into the economy, you're gonna see things puff up despite conditions being lovely elsewhere?
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Oct 27, 2023 16:54
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I suppose investment money flowing in can replace or offset the higher cost of borrowing for business investment, perhaps. But a big part of the reports are that consumer spending remains strong, too, partly on "covid savings" but obviously low unemployment sustains consumer spending. Consumer credit card rates have been spiking for a year but that doesn't seem to have cooled off spending at all.   It's almost as though personal spending is completely unresponsive to personal borrowing costs
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Oct 27, 2023 17:20
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High employment helps but so does high confidence in stability. Most people feel like if they lost their job tomorrow they'd have another one before things got painful, so extending themselves now is ok.Boot and Rally posted:Looking at FRED, 4.9% compounded annual rate of change (CARC) doesn't look that exceptional. So it's not so much the number in a vacuum, but that a bunch of stuff was done to try to keep that number low and instead it went up. That's a problem because it means the levers we're using (I'm being kind using that in plural) maybe aren't doing the things we expect them to be doing. Inflation is staying reasonably under control right now but we're clearly more in the dark than we thought we were which means we may not be as far out of this as we thought. A recession would be bad but it's not really the worst scenario. Runaway inflation that we can't control and that isn't responding to controls would be way worse.
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Oct 27, 2023 17:28
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I wonder how much of this is directly attributable to the stimulative effects of the Inflation Reduction Act starting to come online. 800 billion is quite a lot of demand being injected into the economy. Doesn't matter what the price of money is if the government is giving you big tax credits to replace your furnace or install solar.
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Oct 27, 2023 18:36
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mrmcd posted:I wonder how much of this is directly attributable to the stimulative effects of the Inflation Reduction Act starting to come online. 800 billion is quite a lot of demand being injected into the economy. Doesn't matter what the price of money is if the government is giving you big tax credits to replace your furnace or install solar. It has a part but I am skeptical of the overall impact being that significant, at least this quickly. I think the workforce just changed a lot over the pandemic. Lots of people took the unemployment time to qualify for new skills and position themselves for better careers. Now you have a lot more people in jobs that provide not just better pay, but a better outlook too. The workforce isn't zero sum, when you have a lot of qualified people in certain roles you can see more of those roles open up because now you're getting more valuable people. I've hired a lot of people in a certain age bracket where they went to school for jobs in healthcare fields or the like but used the pandemic to transition to tech where their job is more stable, their financial outlook is a lot better, and they produce a lot more economic output. I imagine there's a lot of people in many different sectors who did similar.
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Oct 27, 2023 18:45
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hypnophant posted:real gdp growth of 3% is a huge outlier among developed nations which mostly count themselves lucky to get 1%. It's far above most economists's predictions for the past year. If you said a year ago you expected 3% real growth you would have got laughed out of the room. People would have called you a propagandist for biden and the fed. It's very much remarkable. Which orthodoxies? Lockback posted:So it's not so much the number in a vacuum, but that a bunch of stuff was done to try to keep that number low and instead it went up. That's a problem because it means the levers we're using (I'm being kind using that in plural) maybe aren't doing the things we expect them to be doing. Inflation is staying reasonably under control right now but we're clearly more in the dark than we thought we were which means we may not be as far out of this as we thought. Which stuff? I see a possible outlier between inflation and a few metrics, but nothing that would warrant 'extraordinary'. Red is Q3 2023, blue is all quarters back to 1974. 
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Oct 27, 2023 19:38
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Boot and Rally posted:Which orthodoxies? conventional monetary policy. the orthodox view is that tightening monetary policy raises the cost of investment, leading businesses to invest less, which reduces output in later quarters (how much later depends); but we've been tightening monetary policy for over a year and output stays steady, or continues to rise quote:Which stuff? I see a possible outlier between inflation and a few metrics, but nothing that would warrant 'extraordinary'. Red is Q3 2023, blue is all quarters back to 1974.  I counted and at 4.87%, Q3 2023 is the 7th best quarter going back to the financial crisis. it's the 10th best going all the way back to 2000. Going back to 1974 is very misleading because growth was both higher on average, and more volatile back then. These aren't just random numbers; inflation, the FFR, and GDP are complexly interrelated on a variable time lag with crucial discretionary links. A simple scatterplot isn't going to tell you anything useful. hypnophant fucked around with this message at 21:20 on Oct 27, 2023 |
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Oct 27, 2023 21:14
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orthodox physics can get you sigfigs of prediction and control, orthodox economics cannot. it just cant. wait 250 years
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Oct 27, 2023 21:21
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you’re not wrong but we can’t wait 250 years to set an interest rate
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Oct 27, 2023 21:41
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hypnophant posted:conventional monetary policy. the orthodox view is that tightening monetary policy raises the cost of investment, leading businesses to invest less, which reduces output in later quarters (how much later depends); but we've been tightening monetary policy for over a year and output stays steady, or continues to rise The data you’re plotting is the same data as column 1 in my plot, except you’re plotting CAGR and I’m plotting YOY. In the YOY plot GDP is dead center. Can you explain how CAGR is calculated and reproduce the plot from the raw data? That would go along way to supporting your claim that CAGR shows something meaningful and YOY doesn’t. Even if I just go back to 2000, the YOY real GDP looks like the mean. It sounds like you’re suggesting that correlations from a “simple scatter plot” do not matter but there is insight you can gain from just the single plot. Also things are “complexly interrelated” but not correlated, which I don’t understand. Is there a simple model that shows that this time is different starting after the Great Recession? Maybe a regression discontinuity design. Do you have something like that?
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Oct 27, 2023 21:56
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hypnophant posted:you’re not wrong but we can’t wait 250 years to set an interest rate how they do it is a bigass kalman filter with hand set features tho aint it?
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Oct 27, 2023 21:57
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Boot and Rally posted:The data you’re plotting is the same data as column 1 in my plot, except you’re plotting CAGR and I’m plotting YOY. In the YOY plot GDP is dead center. Can you explain how CAGR is calculated and reproduce the plot from the raw data? That would go along way to supporting your claim that CAGR shows something meaningful and YOY doesn’t. Even if I just go back to 2000, the YOY real GDP looks like the mean. This BEA handbook describes how compound growth rates are calculated; click Chapter 4: Estimating Methods and scroll to page 29 in the appendix. I don't think it matters whether CARC or YOY is used, here's the same plot YOY:  Q3 2023 is the 15th best rather than 7th. that puts it at the 75th rather than 90th percentile, but either way it is "A good quarter." I'm not making a claim beyond that. Certainly no one is saying that FFR and mortgage rates, for instance, are uncorrelated. Your own plots show they very much are. quote:Is there a simple model that shows that this time is different starting after the Great Recession? Maybe a regression discontinuity design. Do you have something like that?  bob dobbs is dead posted:how they do it is a bigass kalman filter with hand set features tho aint it? FOMC meets and votes. A Kalman filter may be involved at some lower level of the bureaucracy, but I don't think that's in the minutes. e: the Taylor Rule was proposed as a guide for setting the FFR, and there was some talk during the END THE FED days about new legislation requiring it to be used, but that didn't go anywhere and the FOMC does not officially use the Taylor Rule to set monetary policy. The Taylor rule recommendation would have been negative rates for a brief period in 2008 or 2009; it's unlikely any of its advocates would really have wanted that followed through on. hypnophant fucked around with this message at 22:30 on Oct 27, 2023 |
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Oct 27, 2023 22:21
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What effect is total assets supposed to have on GDP?
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Oct 27, 2023 22:51
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Boot and Rally posted:What effect is total assets supposed to have on GDP? the graph shows the difference in monetary policy as practiced by the Fed pre- and post- GFC. similar graphs can easily be found for the bank of england and european central bank showing similar patterns in policy changes
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Oct 27, 2023 23:09
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You previously said:hypnophant posted:conventional monetary policy. the orthodox view is that tightening monetary policy raises the cost of investment, leading businesses to invest less, which reduces output in later quarters (how much later depends); but we've been tightening monetary policy for over a year and output stays steady, or continues to rise Is increasing “total assets” akin to “tightening monetary policy”? I honestly do not know. It seems like your argument was that this GDP increase is extraordinary in the face of tightening monetary policy, as outlined in the above, but also this time is different because total assets are higher than ever.
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Oct 27, 2023 23:35
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If you're not sure what that graph is, "Total Assets" is from the Fed's balance sheet. increasing it is known as Quantitive Easing (QE) and is a way to loosen monetary policy when the ordinary way to loosen monetary policy (lowering the interest rate) is not available because the interest rate is already zero. We are currently undergoing QT, quantitive tightening, which is a form of tightening money policy, but the Fed is taking this very slow by simply not replacing bonds it holds as they mature (rather than selling them off, which would have, uh, macro implications.) The main effective form of tightening is the ordinary one of raising the interest rate. You have misread my argument somewhat. Conventional monetary theory says there is an inverse relationship between inflation and unemployment. You can google "phillips curve" for more on this topic. Therefore, when you lower inflation by raising the interest rate, you also lower the employment rate. The employment rate is linked to GDP, so in the short term this is the lever by which monetary policy affects GDP. Therefore tight monetary policy -> less employment -> lower GDP. in this context it doesn't matter that 40 years ago we had a 5% FFR and 5% GDP growth since 40 years ago, 5% FFR was loose monetary policy, not tight, and 5% growth was around average. Now, 5% GDP growth is regarded as quite high, since we're in an era of lower growth, and 5% FFR is regarded as tight policy, since FFR has been bouncing off 0 for the last decade and a half. So that's why we're saying the GDP increase is unexpected - it fairly directly contradicts the conventional understanding of monetary theory, revealing (IMO) a big hole in our knowledge. Did you know october is economics education month? I did, because I started following the Fed on instagram
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Oct 28, 2023 00:04
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The issue *might* be that the US markets are still the by far best options in the world. So even as the Fed tightens the screws, money (and jobs) keep pouring in. Kind of a good problem to have, except for the inflation. I can say that startups have had a rough 2 years here. The money really dried up. Companies that *need* investment and financing to operate are facing very short runways. But apparently many many startups making GBS threads the bed hasn't really made a dent in employment or gdp.
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Oct 28, 2023 03:51
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hypnophant posted:You have misread my argument somewhat. Conventional monetary theory says there is an inverse relationship between inflation and unemployment. You can google "phillips curve" for more on this topic. Therefore, when you lower inflation by raising the interest rate, you also lower the employment rate. The employment rate is linked to GDP, so in the short term this is the lever by which monetary policy affects GDP. Therefore tight monetary policy -> less employment -> lower GDP. in this context it doesn't matter that 40 years ago we had a 5% FFR and 5% GDP growth since 40 years ago, 5% FFR was loose monetary policy, not tight, and 5% growth was around average. Now, 5% GDP growth is regarded as quite high, since we're in an era of lower growth, and 5% FFR is regarded as tight policy, since FFR has been bouncing off 0 for the last decade and a half. So that's why we're saying the GDP increase is unexpected - it fairly directly contradicts the conventional understanding of monetary theory, revealing (IMO) a big hole in our knowledge. The part in bold is wrong. The Philips curve says that when you increase the fed rate in order to lower inflation, you increase unemployment. I do not think I am misreading your posts, your narrative expands every time I ask a question. When I asked which orthodoxies you didn’t mention the Phillips curve, only that economic contraction is caused by monetary tightening. I guess you’re now saying that effect is mediated by the Philips curve. You haven’t mentioned the fundamental way in which ‘economic orthodoxy’ is currently broken: that somehow inflation and unemployment aren’t seemingly linked. You say that we are in a era of low GDP growth, compared to times past but ignore the plot that shows that mean growth is the same as pre-2008. If you look at the time series, if anything it is volatility that has gone down. I don’t know where you got the 75th or 90th thing from, can you plot the data? Also, you misread my argument. I didn’t mention FFR and the relation to GDP. In fact if you look at the plot I posted the may be a small positive correlation in certain circumstances. I think you’re overly focused on FFR defining tight or loose policy. In the decades prior to 2008, starting in the early 80s, the FFR was declining, this is loose monetary policy. In the years after 2008, total asset purchases were increasing (QE) which is also loose monetary policy. So I think it perfectly reasonable to compare time periods of loose monetary policy.
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Oct 28, 2023 16:39
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Boot and Rally posted:The part in bold is wrong. The Philips curve says that when you increase the fed rate in order to lower inflation, you increase unemployment. read it again
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Oct 28, 2023 17:26
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Cool, we agree how the curve works. Can you address anything else that was posted? Your whole story does not hang together. I have found it difficult to keep up with the shifting narratives.
Boot and Rally fucked around with this message at 17:46 on Oct 28, 2023 |
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Oct 28, 2023 17:44
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As an interested observer, could you clarify what you're actually arguing about? I don't mean that to be snarky--I legitimately can't tell what the point of contention is in this conversation.
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Oct 28, 2023 18:45
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Boot and Rally posted:Also, you misread my argument. I didn’t mention FFR and the relation to GDP. In fact if you look at the plot I posted the may be a small positive correlation in certain circumstances. I think you’re overly focused on FFR defining tight or loose policy. In the decades prior to 2008, starting in the early 80s, the FFR was declining, this is loose monetary policy. In the years after 2008, total asset purchases were increasing (QE) which is also loose monetary policy. So I think it perfectly reasonable to compare time periods of loose monetary policy. Boot and Rally, if it seems like my "story is changing," it's because I'm bringing in quite basic monetary theory concepts which I assumed you were already familiar with. I don't know what your background is and what level to talk to you at and I'm confused by the way you are using data. This is a much more theory-driven area of economics but you keep asking for statistical methods which don't really make sense to apply. And while I agree I misread your argument, the paragraph above is totally wrong. The FFR, federal funds rate, is absolutely the key monetary policy lever the Fed employs; see the FOMC meeting statements here. In almost every statement, the announcement of the funds rate appears in the 3rd or 4th paragraph and is the pivotal policy announcement of the meeting. In fact up until the introduction of QE the FFR was the only policy lever the Fed regularly used. You also have an incomplete understanding of "tight" and "loose" policy. While it's true that the FFR was trending down for most of the 80s and is therefore "loosening", it is still "tight" monetary policy because it is restrictive, above the "neutral" rate of interest which does not cause the economy to grow faster or slower than the natural growth of potential output. Read more at my earlier link to the Taylor Rule wiki page. The neutral rate of interest is not measured but must be basically guessed at, usually years after the fact. There is no agreed upon econometric model for it so I won't give a link. In any event the entire period of Paul Volcker's chairmanship, and the beginning of Greenspan's, (ie, 1979 to the mid-90s) is regarded as tight monetary policy, thereafter achieving at most a neutral stance until around 2000. We had undeniably loose monetary policy from 2009 to 2022, after which the Fed began tightening very rapidly in response to the increase in inflation. Here's a graph which I think illustrates the concepts well:  What you can clearly see is that prior to 2020, every time the policy rate starts to increase, GDP growth (eventually) starts to fall. That's the expected behavior and why the current growth seems counterintuitive to many market participants. hypnophant fucked around with this message at 21:00 on Oct 28, 2023 |
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Oct 28, 2023 20:57
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It’s anecdotal but at work we’re cutting back on new projects because the cost to debt finance them has increased. If we want to do a bond issuance, we get less for the tame amount t of debt we go into.
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Oct 28, 2023 22:24
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Agronox posted:As an interested observer, could you clarify what you're actually arguing about? hypnophant is defending the claim that GDP growth in Q3 2023 was 'extraordinary'. I think it looks pretty normal, given data since 1974 (where the data I can find starts). This discussion has gone long past the import of Q3 2023 and moved into a discussion of economic orthodoxy. The contention then comes because hypnophant claims that we can't look back to 1974, because things have been different since 2008. If one were to only look back until 2008, Q3 2023 growth would look incredible. But they haven't done any analysis back to 2008 because "statistical methods which don't really make sense to apply", with no explanation why. I'm just supposed to take wiki links as fact. Going back and looking through it, it seems hypnophant is representing a group of orthodox economists who aren't here to defend themselves, so the only responses that can be given to 'why' is 'here is another wikipedia article'. I'm not trying to be snarky either, I'm trying to get the discussion I think I useful. What I've determined from this discussion it that apparently things are "tight" or "loose" based on a look back to determine if some combination Taylor rule and Philips curve determine they were tight or loose after the fact. Which means that it is post facto justification of the things that happened, which isn't very useful. It also means that in some time hence someone could declare Q3 2023 "loose monetary policy" and thus the growth will appear in line with expectations, and not extraordinary. Hypnophant's latest post claims the FFR is the key policy lever. I never claimed otherwise, so I can't be wrong about that, but that point seems to have been misread. In a previous post when I asked about what was different since 2008 I was given a plot of QE/QT. To me this means that while FFR may have been the key policy lever, it isn't the only one anymore. To me this makes the argument that "FFR goes up, GDP should not go up, so Q3 2023 is extraordinary" inconsistent. Either things really have been different since 2008 and QE/QT matters and we do not yet know if we have exited loose policy to tight policy, or QE/QT doesn't matter and the look back to 1974 is germane and this growth is just the mean growth and not extraordinary. Hypnophant also spends a good deal of time talking about tight or loose policy, but ends the post talking about "tightening", which only indicates direction, not that we've switched from loose to tight and thus only need to follow the FFR. My goal is to summarize what I am hearing, I'm not trying to post about posters here, or deliberately misconstrue statements. I'm sure others find it tedious, but I find it quite interesting.
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Oct 29, 2023 17:36
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Thank you!
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Oct 29, 2023 19:38
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Boot and Rally posted:Hypnophant's latest post claims the FFR is the key policy lever. I never claimed otherwise, Boot and Rally posted:I think you’re overly focused on FFR defining tight or loose policy. In the decades prior to 2008, starting in the early 80s, the FFR was declining, this is loose monetary policy. please clarify because I must have misread this, which is good because it sounds like an absolutely insane statement to make also tight and loose describe a policy stance, not an ex post evaluation. certainly economists can and do look back and say “policy in october 2023 was insufficiently tight to achieve the stated goal of disinflation,” but it would be very unusual to say the least to say policy was actually loose. tight or loose policy is the goal of a policy intervention, not a neutral, objective description. please actually read some of those wiki links so I don’t have to explain this any more
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Oct 29, 2023 19:58
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Fed rate decision Wednesday, labor jobs report Friday
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Oct 30, 2023 10:45
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This is interesting:WSJ posted:Jury Finds Realtors Conspired to Keep Commissions High, Awards Nearly $1.8 Billion in Damages It always surprised me how well real estate agents have been able to protect that 6%. Maybe there's a crack in the dam.
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Oct 31, 2023 20:29
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Agronox posted:This is interesting: It'd be great if that poo poo goes away. There's no good (for home buyers/sellers, at least) reason that 6% is the standard regardless of market, realtor, etc etc.
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Oct 31, 2023 20:34
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Jpow saw his shadow, 4 more weeks of no rate hikes, economy "strong"
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Nov 1, 2023 20:25
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still think we'll get another hike in december unless there's a strong movement in PCE between now and then. The last three months have been stuck at 3.4 and FOMC won't be happy sitting there forever
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Nov 1, 2023 20:43
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eh, i'm in agreement with the strong market consensus that they hold steady next month. the inverse yield curve is reverting, recession predictions from pundits have gone from 100% certainty in 2023, to a possibility in second of half in 2024, while pce is way down from the height of the crisis with no signs yet that we're bouncing off of a bottom for the moment it appears that the fed pulled off a monetary policy miracle that would make greenspan eat his hat by nipping an inflationary spiral in the bud without triggering a recession. i have to figure the fed will want to be very cautious about overshooting at this point. maybe if inflation numbers start coming in well over expectations
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Nov 1, 2023 21:08
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