Here's where me and Ygelsias agreed http://diaryofarepublicanhater.blogspot.com/2012/09/bernanke-goes-all-in.html
"QE3 is here, and it's pretty big. They've announced a form of "open-ended" quantitative easing in which the central bank commits to "purchasing additional agency mortgage-backed securities at a pace of $40 billion per month."
"But there's something much much much more important here than the numbers. It's the guidance. It's not the Evans Plan, and it's not nominal GDP level targeting, but it's good, and it's right here (emphasis added):
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
"This isn't my dream of super-clear forward guidance, but it's a huge step in the direction of Krugman/Woodford style precommitment. The key thing is that they're no longer saying that accommodative monetary policy is conditional on the recovery being weak. Instead, interest rates will stay low for a while even after the economy recovers. In other words, build that apartment building right now.
I reserve the right to flip-flop, but my initial assessment is that this is a huge positive step."
http://www.slate.com/blogs/moneybox.html
What struck me as positive is that he explciitly said he won't lower it until unemployment comes down and the economy improves. Ygelsias emphasizes that he says that Bernanke indicated that it's not like the Fed will be itching to slam on the brakes at the first "green shoots", real or imagined either:
"One basic problem with monetary easing is that there's a kind of reflexivity problem. When we got some bad labor market news last week, journalists all started saying QE3 is now more likely. But if bad labor market news leads to QE, and QE leads to good labor market news, then QE leads to the absence of QE. A paradox! Or if not a paradox, a situation where expectations about the medium term are indifferent to whether QE happens or not. The worse things get, the more the Fed will do to reduce interest rates but the more that interest rate reductions boost the economy the less will be done."
Yes I've often noticed that-it's as if you have to root for bad news to get easing. During the Summer it's been as if bad numbers are half full and good numbers are half empty. The point is that now good economic numbers don't mean that the foot is going to immediately clamp down on the brake.
"His proposed solution is for the Federal Reserve to offer what he calls "Odyssean" guidance. To say, in other words, that low interest rates are going to persist whether or not the economy improves. That doesn't give us a guarantee about what the economy will look like, but it does guarantee that more easing will lead to a better economy than would otherwise exist. Evans' proposal was for clear quantitative goals. Low rates until the unemployment rate drops to such-and-such as long as inflation doesn't go above such-and-such. What the Federal Reserve offered today was a good deal more tepid than that. But they did say that "a highly accommodative stance of monetary policy" (Fedspeak for low interest rates) "will remain appropriate for a considerable time after the economic recovery strengthens."
"In other words, if the Fed succeeds in boosting the economy it's not going to immediately declare victory and reverse course."
http://www.slate.com/blogs/moneybox.html
What struck me as positive is that he explciitly said he won't lower it until unemployment comes down and the economy improves. Ygelsias emphasizes that he says that Bernanke indicated that it's not like the Fed will be itching to slam on the brakes at the first "green shoots", real or imagined either:
"One basic problem with monetary easing is that there's a kind of reflexivity problem. When we got some bad labor market news last week, journalists all started saying QE3 is now more likely. But if bad labor market news leads to QE, and QE leads to good labor market news, then QE leads to the absence of QE. A paradox! Or if not a paradox, a situation where expectations about the medium term are indifferent to whether QE happens or not. The worse things get, the more the Fed will do to reduce interest rates but the more that interest rate reductions boost the economy the less will be done."
Yes I've often noticed that-it's as if you have to root for bad news to get easing. During the Summer it's been as if bad numbers are half full and good numbers are half empty. The point is that now good economic numbers don't mean that the foot is going to immediately clamp down on the brake.
"His proposed solution is for the Federal Reserve to offer what he calls "Odyssean" guidance. To say, in other words, that low interest rates are going to persist whether or not the economy improves. That doesn't give us a guarantee about what the economy will look like, but it does guarantee that more easing will lead to a better economy than would otherwise exist. Evans' proposal was for clear quantitative goals. Low rates until the unemployment rate drops to such-and-such as long as inflation doesn't go above such-and-such. What the Federal Reserve offered today was a good deal more tepid than that. But they did say that "a highly accommodative stance of monetary policy" (Fedspeak for low interest rates) "will remain appropriate for a considerable time after the economic recovery strengthens."
"In other words, if the Fed succeeds in boosting the economy it's not going to immediately declare victory and reverse course."
"That's good news. But it still does leave an incredible amount of ambiguity. They should get clearer and bolder at their next meeting."
So Ygelsais does think they should do a little more polishing. But as he says, it is "huge, positive, step."
So Ygelsais does think they should do a little more polishing. But as he says, it is "huge, positive, step."
Anon, I wish I could say the same.
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