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(Wall Street Journal)   WSJ: the Fed is making a huge mistake. Fark: because it's bringing down unemployment too fast   (m.us.wsj.com) divider line 49
    More: Asinine, Wall Street Journal, tentative, policy committee, interest rates, market participant, labor markets  
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1159 clicks; posted to Business » on 06 Dec 2013 at 3:11 PM (19 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



49 Comments   (+0 »)
   
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2013-12-06 12:19:45 PM
You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation? If QE is working too well, then you're damn right it's a cause for concern. Focusing on the short-term is bad,  subbs.
 
2013-12-06 12:43:43 PM
Just to bring clarity here:  Salary bubbles that increase wages: Bad.. but if money market managers profit on bubbles they create: Good
 
2013-12-06 01:15:07 PM
If demand for US labor increases, the price goes up.  And that extra expense comes right out of the CEOs pocket.  Which is a catastrophe.
 
2013-12-06 01:39:08 PM

Marcus Aurelius: If demand for US labor increases, the price goes up.  And that extra expense comes right out of the CEOs pocket.  Which is a catastrophe.


Look, I'm all for lowering unemployment, but the Feds over do it with their QE plan, they'd undermine their credibility.

The question the article poses has absolutely nothing to do with the headline. Everyone and their brother knows that the Fed can't keep up the status quo, and that QE is only a temporary solution, and back in June they said they'd stop QE when unemployment reached 7%. Now it's reached 7%. Continuing QE undermines their credibility; the market fully expected QE to end when the unemployment rate hit 7.0%, and that after the market, without assistance from the fed with QE, would expect to see no raise in interest rates until unemployment hit 6.5%. In addition, using QE to get the unemployment rate down even further gets exponentially more risky overtime. This has absolutely NOTHING to do with CEOs and shareholders being greedy, you twat.
 
2013-12-06 01:46:05 PM
So how long before they start to raise interest rates?
 
2013-12-06 03:00:25 PM
What's the WSJ going to biatch at Obama about if he fixes unemployment and the economy?
 
2013-12-06 03:20:50 PM

video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation? If QE is working too well, then you're damn right it's a cause for concern. Focusing on the short-term is bad,  subbs.


The CPI has increased by all of 0.9%, or 0.79% annualized, since QE3 was announced so... bite me?

Plus, the Fed has very effective tools for fighting high inflation, whereas its methods for fighting deflation or low inflation have been ineffective with short-term rates under 1%.
 
2013-12-06 03:30:08 PM

video man: Everyone and their brother knows that the Fed can't keep up the status quo, and that QE is only a temporary solution, and back in June they said they'd stop QE when unemployment reached 7%. Now it's reached 7%.


Didn't they say they'd start "tapering down" QE when unemployment hit 7?

Seems to me that suddenly pulling the cash they're infusing through QE would be a shock to the system as well, n'est-ce pas?
 
2013-12-06 03:30:36 PM

edmo: What's the WSJ going to biatch at Obama about if he fixes unemployment and the economy?


Nothing.  They're not going to be allowed to speak
 
2013-12-06 03:30:57 PM

edmo: What's the WSJ going to biatch at Obama about if he fixes unemployment and the economy?


Presidenting while Democrat. Though, I was told that neither Congress nor the President can create jobs, only kill them...
 
2013-12-06 03:35:25 PM

Smeggy Smurf: edmo: What's the WSJ going to biatch at Obama about if he fixes unemployment and the economy?

Nothing.  They're not going to be allowed to speak


Silenced by the death panels like Ted Nugent, for sure.
 
2013-12-06 03:39:14 PM

video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation? If QE is working too well, then you're damn right it's a cause for concern. Focusing on the short-term is bad,  subbs.


You mean like how shareholders and CEOs do?
 
2013-12-06 03:40:15 PM

edmo: What's the WSJ going to biatch at Obama about if he fixes unemployment and the economy?


biatch about the closing of the 0% interest loan ATM affixed to the Federal Reserve building.

Who knows, maybe interest rates will increase to where my bank statement doesn't report 0.00% effective interest.

/I know its not zero, because I get chumpchange every couple of statements

/never understood why they didn't assign a programer to change percent to mils.
 
2013-12-06 03:42:30 PM
 

video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation?


www.israellycool.com
 
2013-12-06 03:51:26 PM

Vlad_the_Inaner: edmo: What's the WSJ going to biatch at Obama about if he fixes unemployment and the economy?

biatch about the closing of the 0% interest loan ATM affixed to the Federal Reserve building.

Who knows, maybe interest rates will increase to where my bank statement doesn't report 0.00% effective interest.

/I know its not zero, because I get chumpchange every couple of statements

/never understood why they didn't assign a programer to change percent to mils.


If you really care about what rate of return your savings account is getting you're doing it wrong. I've got a rainy day fund in savings, but the rest is in investments that are giving a good yearly rate of return.
 
2013-12-06 03:52:02 PM
The rich love high unemployment.  It means that the masses will work for low wages and no benefits.

/GOP has a laser focus on (destroying) jobs
 
2013-12-06 03:52:39 PM

video man: Marcus Aurelius: If demand for US labor increases, the price goes up.  And that extra expense comes right out of the CEOs pocket.  Which is a catastrophe.

Look, I'm all for lowering unemployment, but the Feds over do it with their QE plan, they'd undermine their credibility.

The question the article poses has absolutely nothing to do with the headline. Everyone and their brother knows that the Fed can't keep up the status quo, and that QE is only a temporary solution, and back in June they said they'd stop QE when unemployment reached 7%. Now it's reached 7%. Continuing QE undermines their credibility; the market fully expected QE to end when the unemployment rate hit 7.0%, and that after the market, without assistance from the fed with QE, would expect to see no raise in interest rates until unemployment hit 6.5%. In addition, using QE to get the unemployment rate down even further gets exponentially more risky overtime. This has absolutely NOTHING to do with CEOs and shareholders being greedy, you twat.


The reason they are not turning off the money spickot is that Uncle Ben does not want to change a thing until Yellen is seated.  It is easier for her to turn it off than it is for her to turn it back on.... if she has the job for the future let her decide.
 
2013-12-06 03:53:51 PM

video man: Continuing QE undermines their credibility; the market fully expected QE to end when the unemployment rate hit 7.0%


as the fed has said repeatedly: it does not exist to impress "the market"...yeah, it's the Fed's fault you have selective hearing, and decided only to listen to 7% after the fed said it wasn't looking at any specific target, but sustained (i.e. not seasonal) improvement.

this credibility bullshiat is trotted out every time any group of market participantswants to rail against it's nearest central bank
 
2013-12-06 04:03:27 PM
Fed: We're not sure what substantial improvement would look like.
WSJ: Would a 7% unemployment be a substantial improvement?
Fed: Well, sure, along with other economic indicators, we'd have to look at...
WSJ: 7%! 7%! HAHA you said it, no backsies! Now what, suckas?!?! checkmate. CHECK. MATE.
 
2013-12-06 04:10:01 PM

Mad_Radhu: Vlad_the_Inaner: edmo: What's the WSJ going to biatch at Obama about if he fixes unemployment and the economy?

biatch about the closing of the 0% interest loan ATM affixed to the Federal Reserve building.

Who knows, maybe interest rates will increase to where my bank statement doesn't report 0.00% effective interest.

/I know its not zero, because I get chumpchange every couple of statements

/never understood why they didn't assign a programer to change percent to mils.

If you really care about what rate of return your savings account is getting you're doing it wrong. I've got a rainy day fund in savings, but the rest is in investments that are giving a good yearly rate of return.


Yeah, after seeing lots of chaos in 2008 time frame,I sort of like places that have FDIC/FSLIC type insurance.  Yeah, even my Credit Union had other suggestions for my IRA.  "is that option insured?"  "No."  "Thanks anyway"

/and I wasn't referring to the rates earned in my 401K statements, just the savings and 'interest' (HA!) checking.at the bank.
/as an afterthought,the IRA was reported doing better than 0.00% anyway
 
2013-12-06 04:10:13 PM

shroom: video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation?

[www.israellycool.com image 300x233]


"excess inflation" meaning raising the inflation rate above the healthy level.

Arkanaut: video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation? If QE is working too well, then you're damn right it's a cause for concern. Focusing on the short-term is bad,  subbs.

The CPI has increased by all of 0.9%, or 0.79% annualized, since QE3 was announced so... bite me?

Plus, the Fed has very effective tools for fighting high inflation, whereas its methods for fighting deflation or low inflation have been ineffective with short-term rates under 1%.


We can't have QE forever. Not to mention, the effects of QE won't make themselves apparent immediately. It will cause inflation, if not now, but latter on down the line. Don't get me wrong, I was/am a fan of QE, and it has single-handedly kept the recession from making the last 4 years a total hellhole, but we can't just QE our way out of this shiat.
 
2013-12-06 04:10:30 PM
Low unemployment or "full employment" means increasing wages (BAD!) and inflation (BAD!) but also means more money for the middle class to spend on goods and services (GOOD!) and more taxable income for the government (GOOD!BAD!GOOD!BAD!*gunshot**cartoonish villian blows smoke from barrel*)

"and the deficit goes down" slinks away without making its presence known
 
2013-12-06 04:14:54 PM
I don't understand why the Fed should care about unemployment, especially it being too low.

If inflation is below 2%, keep on with QE. If inflation gets up toward 4%, cut back.

We don't want deflation and we don't want hyperinflation. So far so good.

If prices are stable-to-slightly-increasing and wages go up, that would be the best of all worlds.
 
2013-12-06 04:19:39 PM

itcamefromschenectady: I don't understand why the Fed should care about unemployment, especially it being too low.


Because, by law, the Fed is required to.

http://www.chicagofed.org/webpages/publications/speeches/our_dual_ma nd ate.cfm

In 1977, Congress amended The Federal Reserve Act, stating the monetary policy objectives of the Federal Reserve as:

"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."


... whether it gives any more than lip service to this mandate is up to the reader.
 
2013-12-06 04:20:04 PM

itcamefromschenectady: I don't understand why the Fed should care about unemployment, especially it being too low.

If inflation is below 2%, keep on with QE. If inflation gets up toward 4%, cut back.

We don't want deflation and we don't want hyperinflation. So far so good.

If prices are stable-to-slightly-increasing and wages go up, that would be the best of all worlds.


It's because inflation doesn't make itself apparent immediately. Unless you're going full-Zimbabwe, you don't see the effects until its too late.
 
2013-12-06 04:20:40 PM

video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation? If QE is working too well, then you're damn right it's a cause for concern. Focusing on the short-term is bad,  subbs.


You inflation hawks, or whatever you are, have been a bug in our ass for years now.  We should have been doing this stuff a long time ago.

You're just the tool of big banks and Wall Street guys who don't want to see the debt they own decline even a millionth of a percent, even if it helps get some churn back in the market.  We're far, far from inflation even getting close to some kind of hysteresis effect.
 
2013-12-06 04:23:45 PM

video man: We can't have QE forever. Not to mention, the effects of QE won't make themselves apparent immediately. It will cause inflation, if not now, but latter on down the line.


Then we can tighten the money supply down the line.  In an economy the size of the US's, inflation isn't going to jump from 0.9% to 10% overnight.
 
2013-12-06 04:24:47 PM

Scorpitron is reduced to a thin red paste: video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation? If QE is working too well, then you're damn right it's a cause for concern. Focusing on the short-term is bad,  subbs.

You inflation hawks, or whatever you are, have been a bug in our ass for years now.  We should have been doing this stuff a long time ago.

You're just the tool of big banks and Wall Street guys who don't want to see the debt they own decline even a millionth of a percent, even if it helps get some churn back in the market.  We're far, far from inflation even getting close to some kind of hysteresis effect.


...I support the use of QE as a tool of last result. Also, I'd like to see what you define what rate "hysteresis effect" to be.
 
2013-12-06 04:26:12 PM

itcamefromschenectady: I don't understand why the Fed should care about unemployment



People always forget about the other mandate the Fed has...

From the Federal Reserve Act of 1977.

"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."
 
2013-12-06 04:34:38 PM

video man: itcamefromschenectady: I don't understand why the Fed should care about unemployment, especially it being too low.

If inflation is below 2%, keep on with QE. If inflation gets up toward 4%, cut back.

We don't want deflation and we don't want hyperinflation. So far so good.

If prices are stable-to-slightly-increasing and wages go up, that would be the best of all worlds.

It's because inflation doesn't make itself apparent immediately. Unless you're going full-Zimbabwe, you don't see the effects until its too late.


If we're not going "full-Zimbabwe", why does it matter? Too late for what?  I think there is an upper limit to how much inflation we can cause. $85 billion a month is about a trillion $ a year, which is about 6% of GDP.If inflation sneaks up on us, it shouldn't be worse than 6% at the present rate of QE.
 
But also, expecting a long delayed reaction doesn't make sense, because if it took a long time for expectations to change, we wouldn't have financial crises or sudden asset price changes.

The rational thing to do would be to continue QE indefinitely as long as we have low inflation and no particular reason to do anything different. There's no reason to repeat Japan's experience with deflation.
 
2013-12-06 04:39:17 PM

Arkanaut: video man: We can't have QE forever. Not to mention, the effects of QE won't make themselves apparent immediately. It will cause inflation, if not now, but latter on down the line.

Then we can tighten the money supply down the line.  In an economy the size of the US's, inflation isn't going to jump from 0.9% to 10% overnight.


The reason why QE's effects aren't apparent yet are two-fold: Banks aren't lending; they're holding onto their excess reserves. And they're getting paid for it by the fed at the tune of .25%, and have been since BEFORE QE1.

Here's a chart:

upload.wikimedia.org

/The chart isn't skewed; I'm not a right-wing troll. Read it again.
 
2013-12-06 04:53:18 PM

itcamefromschenectady: video man: itcamefromschenectady: I don't understand why the Fed should care about unemployment, especially it being too low.

If inflation is below 2%, keep on with QE. If inflation gets up toward 4%, cut back.

We don't want deflation and we don't want hyperinflation. So far so good.

If prices are stable-to-slightly-increasing and wages go up, that would be the best of all worlds.

It's because inflation doesn't make itself apparent immediately. Unless you're going full-Zimbabwe, you don't see the effects until its too late.

If we're not going "full-Zimbabwe", why does it matter? Too late for what?  I think there is an upper limit to how much inflation we can cause. $85 billion a month is about a trillion $ a year, which is about 6% of GDP.If inflation sneaks up on us, it shouldn't be worse than 6% at the present rate of QE.
 
But also, expecting a long delayed reaction doesn't make sense, because if it took a long time for expectations to change, we wouldn't have financial crises or sudden asset price changes.

The rational thing to do would be to continue QE indefinitely as long as we have low inflation and no particular reason to do anything different. There's no reason to repeat Japan's experience with deflation.


You can't tell me infusing 1.8 trillion dollars currently held in excess reserves won't have an effect on inflation.
 
2013-12-06 05:05:54 PM

video man: Arkanaut: video man: We can't have QE forever. Not to mention, the effects of QE won't make themselves apparent immediately. It will cause inflation, if not now, but latter on down the line.

Then we can tighten the money supply down the line.  In an economy the size of the US's, inflation isn't going to jump from 0.9% to 10% overnight.

The reason why QE's effects aren't apparent yet are two-fold: Banks aren't lending; they're holding onto their excess reserves. And they're getting paid for it by the fed at the tune of .25%, and have been since BEFORE QE1.

Here's a chart:

[upload.wikimedia.org image 500x535]

/The chart isn't skewed; I'm not a right-wing troll. Read it again.


Ooh, scary.  So scary it's had virtually no effect on prices in the real economy.
 
2013-12-06 05:06:18 PM

video man: itcamefromschenectady: video man: itcamefromschenectady: I don't understand why the Fed should care about unemployment, especially it being too low.

If inflation is below 2%, keep on with QE. If inflation gets up toward 4%, cut back.

We don't want deflation and we don't want hyperinflation. So far so good.

If prices are stable-to-slightly-increasing and wages go up, that would be the best of all worlds.

It's because inflation doesn't make itself apparent immediately. Unless you're going full-Zimbabwe, you don't see the effects until its too late.

If we're not going "full-Zimbabwe", why does it matter? Too late for what?  I think there is an upper limit to how much inflation we can cause. $85 billion a month is about a trillion $ a year, which is about 6% of GDP.If inflation sneaks up on us, it shouldn't be worse than 6% at the present rate of QE.
 
But also, expecting a long delayed reaction doesn't make sense, because if it took a long time for expectations to change, we wouldn't have financial crises or sudden asset price changes.

The rational thing to do would be to continue QE indefinitely as long as we have low inflation and no particular reason to do anything different. There's no reason to repeat Japan's experience with deflation.

You can't tell me infusing 1.8 trillion dollars currently held in excess reserves won't have an effect on inflation.


I'm not sure what you think is going to cause the excess reserves to be use for lending suddenly. But anyway...

It won't have an effect out of all proportion to its size. And a finite sum won't have an ongoing effect. GDP is almost $17 trillion a year now. You have to have some feel for the size of the numbers.

Printing a "lot" of money would be bad. But we are not currently printing a lot of money or running a really big budget deficit. The amount of money we are printing and the budget deficits are good rough estimates of how much inflation we could potentially have. How could we have much more in the long run?

99% of these discussions are about outdated facts or no facts at all.
 
2013-12-06 05:06:46 PM

video man: Scorpitron is reduced to a thin red paste: video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation? If QE is working too well, then you're damn right it's a cause for concern. Focusing on the short-term is bad,  subbs.

You inflation hawks, or whatever you are, have been a bug in our ass for years now.  We should have been doing this stuff a long time ago.

You're just the tool of big banks and Wall Street guys who don't want to see the debt they own decline even a millionth of a percent, even if it helps get some churn back in the market.  We're far, far from inflation even getting close to some kind of hysteresis effect.

...I support the use of QE as a tool of last result. Also, I'd like to see what you define what rate "hysteresis effect" to be.


Ha ha, yes.  I'll fall into the trap of misdirection instead of letting you acknowledge the hoodwinking you're doing.  You guys like to spook people about what's going on in order to save your bottom lines.  Finally -- FINALLY -- the Fed is doing something to actually help the labor force instead of very expensive and vaulted pocket books.
 
2013-12-06 05:39:20 PM
Thanks, Obama
 
2013-12-06 06:03:28 PM

Scorpitron is reduced to a thin red paste: video man: Scorpitron is reduced to a thin red paste: video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation? If QE is working too well, then you're damn right it's a cause for concern. Focusing on the short-term is bad,  subbs.

You inflation hawks, or whatever you are, have been a bug in our ass for years now.  We should have been doing this stuff a long time ago.

You're just the tool of big banks and Wall Street guys who don't want to see the debt they own decline even a millionth of a percent, even if it helps get some churn back in the market.  We're far, far from inflation even getting close to some kind of hysteresis effect.

...I support the use of QE as a tool of last result. Also, I'd like to see what you define what rate "hysteresis effect" to be.

Ha ha, yes.  I'll fall into the trap of misdirection instead of letting you acknowledge the hoodwinking you're doing.  You guys like to spook people about what's going on in order to save your bottom lines.  Finally -- FINALLY -- the Fed is doing something to actually help the labor force instead of very expensive and vaulted pocket books.


You seem to have the impression that I am well-off and work for Wall Street. I can tell you that I'm not. I've worked pretty damn hard for where I am today, and Uncle Sam gave me that opportunity.
 
2013-12-06 06:26:35 PM

itcamefromschenectady: video man: itcamefromschenectady: video man: itcamefromschenectady: I don't understand why the Fed should care about unemployment, especially it being too low.

If inflation is below 2%, keep on with QE. If inflation gets up toward 4%, cut back.

We don't want deflation and we don't want hyperinflation. So far so good.

If prices are stable-to-slightly-increasing and wages go up, that would be the best of all worlds.

It's because inflation doesn't make itself apparent immediately. Unless you're going full-Zimbabwe, you don't see the effects until its too late.

If we're not going "full-Zimbabwe", why does it matter? Too late for what?  I think there is an upper limit to how much inflation we can cause. $85 billion a month is about a trillion $ a year, which is about 6% of GDP.If inflation sneaks up on us, it shouldn't be worse than 6% at the present rate of QE.
 
But also, expecting a long delayed reaction doesn't make sense, because if it took a long time for expectations to change, we wouldn't have financial crises or sudden asset price changes.

The rational thing to do would be to continue QE indefinitely as long as we have low inflation and no particular reason to do anything different. There's no reason to repeat Japan's experience with deflation.

You can't tell me infusing 1.8 trillion dollars currently held in excess reserves won't have an effect on inflation.

I'm not sure what you think is going to cause the excess reserves to be use for lending suddenly. But anyway...

It won't have an effect out of all proportion to its size. And a finite sum won't have an ongoing effect. GDP is almost $17 trillion a year now. You have to have some feel for the size of the numbers.

Printing a "lot" of money would be bad. But we are not currently printing a lot of money or running a really big budget deficit. The amount of money we are printing and the budget deficits are good rough estimates of how much inflation we could potentially have. How could we have much more ...


Because it is having an effect. The policy of paying banks to keep excess reserves has singlehandedly lower the ratio of the money multiplier:

research.stlouisfed.org

The money that QE pumps into the economy isn't causing inflation right now, as every dollar put into the monetary base only effectively adds 79 cents to the money supply due to the interest paid on excess reserves.  That's why there has been little effect caused by QE, because it has yet to come.

Also, you are confusing GDP with the monetary base. In the course of a few years, the percentage of the monetary base being held in excess reserves has jumped from ~0.1% to 50%. GDP is measured in dollars which is directly tied to the effects of money supply. Your comparison is inherently flawed. It's like saying that you're tall because you're over 2000mm tall.
 
2013-12-06 06:32:15 PM

video man: Marcus Aurelius: If demand for US labor increases, the price goes up.  And that extra expense comes right out of the CEOs pocket.  Which is a catastrophe.

Look, I'm all for lowering unemployment, but the Feds over do it with their QE plan, they'd undermine their credibility.

The question the article poses has absolutely nothing to do with the headline. Everyone and their brother knows that the Fed can't keep up the status quo, and that QE is only a temporary solution, and back in June they said they'd stop QE when unemployment reached 7%. Now it's reached 7%. Continuing QE undermines their credibility; the market fully expected QE to end when the unemployment rate hit 7.0%, and that after the market, without assistance from the fed with QE, would expect to see no raise in interest rates until unemployment hit 6.5%. In addition, using QE to get the unemployment rate down even further gets exponentially more risky overtime. This has absolutely NOTHING to do with CEOs and shareholders being greedy, you twat.


I think the Fed will begin to taper as soon as it is sure there won't be another government shutdown.  If the rumored big budget deal happens soon, then so will the tapering.  If not, it won't happen until the next batch of budget and debt limit deadlines pass without a shutdown.  If there is a shutdown of any length, that will stop the clock for at least a few months after the shutdown ends.

Note that the actual unemployment rate is no longer a factor here because it is already at a level that, with a stable government budget process, where the tapering would have already begun.
 
2013-12-06 06:36:08 PM

Geotpf: video man: Marcus Aurelius: If demand for US labor increases, the price goes up.  And that extra expense comes right out of the CEOs pocket.  Which is a catastrophe.

Look, I'm all for lowering unemployment, but the Feds over do it with their QE plan, they'd undermine their credibility.

The question the article poses has absolutely nothing to do with the headline. Everyone and their brother knows that the Fed can't keep up the status quo, and that QE is only a temporary solution, and back in June they said they'd stop QE when unemployment reached 7%. Now it's reached 7%. Continuing QE undermines their credibility; the market fully expected QE to end when the unemployment rate hit 7.0%, and that after the market, without assistance from the fed with QE, would expect to see no raise in interest rates until unemployment hit 6.5%. In addition, using QE to get the unemployment rate down even further gets exponentially more risky overtime. This has absolutely NOTHING to do with CEOs and shareholders being greedy, you twat.

I think the Fed will begin to taper as soon as it is sure there won't be another government shutdown.  If the rumored big budget deal happens soon, then so will the tapering.  If not, it won't happen until the next batch of budget and debt limit deadlines pass without a shutdown.  If there is a shutdown of any length, that will stop the clock for at least a few months after the shutdown ends.

Note that the actual unemployment rate is no longer a factor here because it is already at a level that, with a stable government budget process, where the tapering would have already begun.


I'd agree with that. Obviously there will need to be a tapering process, because there's no way the market can go back to pre-2008 rules that quick. It's just a bit sad that politics needs to be this much involved.
 
2013-12-06 06:36:27 PM

video man: The money that QE pumps into the economy isn't causing inflation right now, as every dollar put into the monetary base only effectively adds 79 cents to the money supply due to the interest paid on excess reserves.  That's why there has been little effect caused by QE, because it has yet to come.


this is a fair point, and you've identified a problem that some fed members have mentioned.

are you saying though, that is is an argument to start the taper?  because it seems to me that cutting the reserve rate makes more sense, and is a more-direct solution to the problem.
this is not to say i don't believe we should keep QE at current rates, I just don't see how tapering is a solution to the problem of excessive reserves
 
2013-12-06 06:46:54 PM

asdfbeau: video man: The money that QE pumps into the economy isn't causing inflation right now, as every dollar put into the monetary base only effectively adds 79 cents to the money supply due to the interest paid on excess reserves.  That's why there has been little effect caused by QE, because it has yet to come.

this is a fair point, and you've identified a problem that some fed members have mentioned.

are you saying though, that is is an argument to start the taper?  because it seems to me that cutting the reserve rate makes more sense, and is a more-direct solution to the problem.
this is not to say i don't believe we should keep QE at current rates, I just don't see how tapering is a solution to the problem of excessive reserves


The excess reserves problem is only partially caused by QE. It's the fact that banks are now paid to sit on their excess reserves, and QE allows them to add to the pile. We need to taper off both QE, and taper off the .25% rate that banks currently receive on their excess reserves, but we'll need to do it really slowly. I mean, a good chunk of the entire monetary base needs to be injected into the money supply, and it can't safely happen overnight. It will result in inflation, but if done right, the rate increase can be held in check.

Essentially we made our shiat sandwich, we need to eat it, but we can eat it slowly.
 
2013-12-06 06:50:01 PM

edmo: What's the WSJ going to biatch at Obama about if he fixes unemployment and the economy?


That's exactly their worst case scenario. The better off people are, the worse the GOP will do in 2014 and forward.
 
2013-12-06 07:20:51 PM
The only mistake I see is reading a Wall Street Journal article.
 
2013-12-06 08:00:51 PM
www.biographyonline.net

are my policies working out for you guys yet? cause i may not have been right...
 
2013-12-06 08:55:18 PM

video man: asdfbeau: video man: The money that QE pumps into the economy isn't causing inflation right now, as every dollar put into the monetary base only effectively adds 79 cents to the money supply due to the interest paid on excess reserves.  That's why there has been little effect caused by QE, because it has yet to come.

this is a fair point, and you've identified a problem that some fed members have mentioned.

are you saying though, that is is an argument to start the taper?  because it seems to me that cutting the reserve rate makes more sense, and is a more-direct solution to the problem.
this is not to say i don't believe we should keep QE at current rates, I just don't see how tapering is a solution to the problem of excessive reserves

The excess reserves problem is only partially caused by QE. It's the fact that banks are now paid to sit on their excess reserves, and QE allows them to add to the pile. We need to taper off both QE, and taper off the .25% rate that banks currently receive on their excess reserves, but we'll need to do it really slowly. I mean, a good chunk of the entire monetary base needs to be injected into the money supply, and it can't safely happen overnight. It will result in inflation, but if done right, the rate increase can be held in check.

Essentially we made our shiat sandwich, we need to eat it, but we can eat it slowly.


Isn't the bigger picture that with the baby boomers retiring now, we have strong deflationary pressures and are going to for some time? I think we need to decrease the interest rate on excess reserve first and see how it goes before tapering QE.
 
2013-12-07 08:34:22 AM

video man: You know how I know that you don't know that increasing the money supply only has a short-term effect on unemployment, but has a possibility of lasting long-term effect of excess inflation? If QE is working too well, then you're damn right it's a cause for concern. Focusing on the short-term is bad,  subbs.


But corporate America has been assuring me for the past 30 years or so that we need feel no responsibility beyond next Q's P&L statement.
 
2013-12-07 10:59:41 AM
Look, if unemployment drops too fast, then the labor market will favor the workers, then the serfs will demand we pay them enough to both eat AND have a roof over their heads... is that what you really want, is it? Farkin commie socialist welfare queens, trying to make a living off of "work" instead of investment... what is this... Canada?
 
2013-12-07 02:41:16 PM
QE should be scaled back. When the inflationary rate is kept too low, there is no financial incentive to lend and hoarding happens. If sitting on your cash cost you 2% a year, then banks start looking for avenues of return greater than 2%. Since consumption (from them) isn't a positive return, the only other variable they can control is investment - usually by loaning money which fills a market demand for consumption.

If you pay someone money to not spend, then they won't spend.
 
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