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Bob McTeer  

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  • You Can Spend Your Way Out of a Recession [View article]
    Yes, I saw that. My guess is--and it's only a guess--that he meant "Fed" as in "the Feds," or government officials. The fact that he was a Census worker, I think, makes that more likely. For clarity on that point, I sometimes us "Federalies" with tongue in cheek.
    "Fed Up" may also have been intended. I once had a tee shirt made with that on it.

    Bob McTeer

    On Sep 25 03:15 PM Michael Clark wrote:

    > Did you guys read about the suicide in Kentucky who hanged himself
    > and had 'FED' carved in his chest?
    > Coroner: 'Fed' written in pen on US Census worker
    > By JEFFREY McMURRAY and ALLEN G. BREED (Associated Press Writers)
    > From Associated Press
    > September 25, 2009 2:21 PM EDT
    > BIG CREEK, Kentucky - Authorities said a U.S. Census worker died
    > by asphyxiation but were releasing few other details about the mysterious
    > case nearly two weeks after his body - with the word "fed" scrawled
    > on the chest - was found hanging from a tree near a family cemetery
    > secluded by forest in rural Kentucky.
    > The word appeared to have been written with a felt-tip pen on the
    > body of Bill Sparkman, Clay County Coroner Jim Trosper said Friday.
    > He did not elaborate.
    Sep 26, 2009. 08:55 AM | 4 Likes Like |Link to Comment
  • M2 Growth and Why Inflation Concerns Are Overblown [View article]
    Referring to TTurk's comment 2 spots above, velocity is important, but it is generally known that velocity has been depressed for some time. Adding velocity would only reinforce the conclusion of the post, not weaken it.
    Mar 26, 2010. 08:52 AM | 3 Likes Like |Link to Comment
  • 'When Money Dies': Moderation The Key To Money Printing [View article]
    Regarding "Banks' appitite for holding excess reserves" the raconteur is correct that they were pumpted into the banking system in QE1 for the reasons he cited. My point is simply that the banks held onto most of those reserves plus more from QE2 (their "appetite") rather than converting them into required reserves through agressive lending and investment. As in the great depression, "excess" reserves may have been excess by regulation but not necessarily excess in the minds of the bankers given all they were (and still are) going through.
    Bob McTeer
    Sep 1, 2012. 12:34 PM | 2 Likes Like |Link to Comment
  • More Causal Confusion: The FOMC's Decision and Market Reaction [View article]
    Excellent article!
    Sep 25, 2011. 09:16 AM | 2 Likes Like |Link to Comment
  • Is the Recession Finally Ending? I'm Hopeful but Not Convinced [View article]
    Of course you are right about NBER, and probably several other things as well. I probably wrote too much to make a simple point, and made errors in doing so.

    I don't actually remember when Nov 2001 was declared the trough of the recession or the first month of recovery. What I do remember was the surprise of the early rebound, and that the zero interest rates on autos were a major factor. I also think I remember that there were a few months of job growth early in 2002 before weakness resumed. The weakness contributed to further disinflation and some concern about a possible double dip recession. And, of course, the disinflation concerns turned into concerns about deflation by the Chairman.

    If you are right that they would wait for 2 quarters GDP growth before making a declaration, my issue pretty much goes away since they will see what is happening to the employment/unemployment numbers at the same time. I still find it hard to believe they will declare a recovery while employment is still falling.

    On Aug 21 01:10 PM Vox Rationalis wrote:

    > NBER, not NBEA.
    > "I doubt that they well declare the recession over while payrolls
    > continue to decline, even if we get positive GDP growth in the current
    > quarter, especially if the growth results primarily from an inventory
    > rebound and one-time clunker rebates."
    > No, payrolls continuing to decline following the trough is typical.
    > But I wouldn't expect NBER to declare a bottom until two quarters
    > of growth have followed it.
    > "The BCDC declared the last recession over in November 2001."
    > No. In November 2001, NBER identified the beginning of the recession
    > to be March 2001. It didn't identify the November trough until July
    > 2003.
    > "My point is that the BCDC didn't declare the recession over while
    > employment was still falling."
    > True, but irrelevant. That NBER waited a long time to declare the
    > trough doesn't mean the recession wasn't over. In its July 2003
    > release, it explained the reasoning. (
    > "The committee waited to make the determination of the trough date
    > until it was confident that any future downturn in the economy would
    > be considered a new recession and not a continuation of the recession
    > that began in March 2001. The committee noted that the most recent
    > data indicate that the broadest measure of economic activity-gross
    > domestic product in constant dollars-has risen 4.0 percent from its
    > low in the third quarter of 2001, and is 3.3 percent above its pre-recession
    > peak in the fourth quarter of 2000. Two other indicators of economic
    > activity that play an important role in the committee's decisions-personal
    > income excluding transfer payments and the volume of sales of the
    > manufacturing and wholesale-retail sectors, both in real terms-have
    > also surpassed their pre-recession peaks. Two other indicators the
    > committee focuses on-payroll employment and industrial production-remain
    > well below their pre-recession peaks. Indeed, the most recent data
    > indicate that employment has not begun to recover at all. The committee
    > determined, however, that the fact that the broadest, most comprehensive
    > measure of economic activity is well above its pre-recession levels
    > implied that any subsequent downturn in the economy would be a separate
    > recession."
    > NBER will wait long enough so that it is confident a further deterioration
    > will be considered a separate recession. The 1991 trough was identified
    > 21 months later, the 1982 trough 8 months later; the latter recovery
    > was much stronger than the former.
    > "Employment resumed falling after the recession end had been called.
    > If they had delayed their pronouncement a few months, I doubt that
    > they would have been pegged as the end month."
    > No - I think you don't have the announcement date correct. It's
    > true that employment continued to decline for a couple of months
    > after November 2001, but this is typical.
    > "Recent declines in payrolls have moderated, but are still large
    > in historical context."
    > Typical of the latter stages of recessions.
    > "The decline in inventories contributed 0.8 percent of the 1 percent
    > decline in real GDP. That plus the inventory decline in the previous
    > quarter sets the economy up for a significant inventory rebound in
    > the current, third quarter. GDP would be boosted in a technical sense,
    > but not, in my opinion, in a fundamental lasting way."
    > If you're saying that GDP will be artificially high in Q3 because
    > of inventory replenishment, wasn't GDP artificallly low in Q2 because
    > of inventory reduction? Isn't this a wash at worst?
    > "Note that both exports and imports have declined recently, but imports
    > declined more, suggesting a weak U.S. economy relative to our trading
    > partners."
    > Perhaps. Remember to include at least two things in the analysis:
    > the price of oil and exchange rate changes, both of which have had
    > dramatic swings in the last year.
    Aug 22, 2009. 10:37 AM | 2 Likes Like |Link to Comment
  • Monetary Policy: It's About Money Supply [View article]
    You are too kind, but thanks. The check is in the mail.


    On Aug 21 10:39 PM dividendmachine1 wrote:

    > Bob McTeer is perhaps one of the smartest men I have heard speak
    > on this website
    > Bob you are a great man and your wisdom is priceless
    Aug 22, 2009. 10:13 AM | 2 Likes Like |Link to Comment
  • Monetary Policy: It's About Money Supply [View article]

    You are probing at a vulnerable spot, but I'll try to clarify. I grew up a Friedman monetarist. When V became too unpredictible, we had to accept something else (the Fed Funds rate) as the short term policy instrument, but that didn't mean we thought it was more important than money growth in the long run. Recently the size of the balance sheet has become a popular indicator of policy, although the discussions of the latter are very sloppy--making no room for composition, etc.

    You are right (by implication) that all these things have positive correlation and tend to move together, but I can't believe that it is 100 %. I don't think there is a unique FF rate that goes with a specific percentage increase in money growth and a speific size of the balance sheet. I think ranges of these things are more likely than specific, unique values. Therefore, I'd like for them to let the FF rate go to 1 percent, without the money supply going through the roof. I think it is POSSIBLE (don't know about likely) that if Bernanke announced that a slightly higher FF rate would reduce distortions in the money market, but that he doesn't vied it as a tightening of monetary policy. He is going to make sure the money supply growth doesn't get out of hand. I think the announcement effect might work if proper educational groundwork has been laid.
    That may sound fanciful, but many people seem to assume it works with exchange rates when they urge the President and Treasury Secretary to talk up a "strong dollar policy' without urging them to intervene in the FX markets to make it happen.

    I hope I haven't just dug my hole deeper. Thanks for your question.

    On Aug 12 07:29 AM djackson wrote:

    > Your next piece might further clarify your last paragraph. I understand
    > the various correlations that sometimes exist and sometimes do not.
    > Having said that, I am having trouble parsing exactly what you mean
    > when you talk about raising rates before easing monetary policy.
    > That seems to be contradictory although I am sure you have a point
    > in there I have missed. Please clarify.
    Aug 22, 2009. 10:07 AM | 2 Likes Like |Link to Comment
  • Monetary Policy: It's About Money Supply [View article]
    I agree with you on that. But many don't understand the balance sheet as well as you do and just assume that each dollar of asset added adds a dollar to monetary liabilities. They look at the size only and not the composition. But what remains on the balance sheet doesn't cause inflation unless it turns into money and that money is spent. I thing Bernanke and Company probably can reign it in when that process starts. But you may be right.

    On Aug 12 11:55 AM CautiousInvestor wrote:

    > A nice article but I would like to parse one point: the inflation
    > implications of an expanding Fed balance sheet.
    > In and of itself, an expanding Fed balance sheet is not inflationary
    > providing that increased reserves are not expanding the money supply
    > at an unreasonable rate, assuming the money multiplier remains constant.
    > The concern, though, is whether the Fed.......after signs of inflation
    > do appear.......can contract its balance sheet fast enough to blunt
    > inflationary forces. And this concern has to do with the political
    > will of the Fed and the quality of assets on the Fed balance sheet
    > which have deteriorated as of late.
    Aug 12, 2009. 05:39 PM | 2 Likes Like |Link to Comment
  • Monetary Policy: It's About Money Supply [View article]
    My distinction between money and credit when it comes to banks is that banks make loans and purchase investments (credit) which show up as assets on their balance sheets. Doing that creates bank reserves and currency, which provide the ability for banks to create deposit money on the liability side of the balance sheet. The credit assets and the monetary liabilities do tend to rise and fall together, so usually there is not much point in making a distinction.
    However, banks aren't the only institutions that create credit, while they are where money shows up. We've had much credit destruction in this crisis from the nonbank sector, which calls for the Fed to be more aggressive in filling the hole.

    On Aug 12 08:09 AM MinAkkar20 wrote:

    > Bob,
    > I don't understand your distinction between money expansion and credit
    > expansion. Credit expansion has to be viewed in conjunction with
    > money expansion because most of the money supply in the US comes
    > from commercial debt. Using 10% as average reserve requirements
    > (it varies based on reserve amounts) each dollar reserve that a member
    > bank has on its books allows for 9 dollars of lending. If $5 of
    > that lending is redeposited then they now can lend an additional
    > $4.5, etc. Look at this graph to see how great the potential is
    > compared to historical standards: research.stlouisfed.or...
    > Expansion of the Fed balance sheet is only the tip of the iceberg.
    > The bottom line is the Fed is trying to reinflate every capital asset
    > without affecting consumer staples in the face of high unemployment.
    > It is a dangerous game. Given the uncountable inputs that go into
    > our economy, I'm not too optimistic that they can get it right, especially
    > given the boom-bust history of the Federal Reserve system.
    Aug 12, 2009. 05:35 PM | 2 Likes Like |Link to Comment
  • Bank Reserves: A Hot Potato [View article]
    To NeedMoreCoffee: both.

    To thannagan: I agree.
    Bob McTeer
    May 24, 2013. 09:05 AM | 1 Like Like |Link to Comment
  • Money Isn't 'Easy': 9 Points [View article]
    Good piece, Scott.
    May 20, 2013. 09:17 AM | 1 Like Like |Link to Comment
  • The Fed Has Not Been Printing Boatloads Of Money [View article]
    I see that I made no headway in my principal argument. $85 billion a month is a lot, but it hasn't lead to an increase in the money supply of $85 billion a month. Excess reserves in the banking system has blocked most of the transition from newly created bank reserves to newly created money. Money may be money, but bank reserves are not money. Bob
    Mar 22, 2013. 03:43 PM | 1 Like Like |Link to Comment
  • The Fed Has Not Been Printing Boatloads Of Money [View article]
    My rule for money growth has always been an amount equal to the growth potential of the real economy, which is fairly large when you have 7.7 percent unemployment. The desired money growth, of course, must take velocity changes into account. For the past couple of years we've had about 7.5% money growth partially offset by a 3.5% decline in velocity, yielding a 4.0 percent nominal GDP growth, split evenly betweein 2% real growth and 2% inflation. That's a bit on the low side.
    Mar 22, 2013. 03:39 PM | 1 Like Like |Link to Comment
  • The Fed Has Not Been Printing Boatloads Of Money [View article]
    After two decades of deflation, I don't think the Japanese should worry too much about hyper inflation. They have tried the "too little, too late" policy all along. Too bad the central bank didn't get more agressive before government interference forced their hand.

    Mar 22, 2013. 03:29 PM | 1 Like Like |Link to Comment
  • 'When Money Dies': Moderation The Key To Money Printing [View article]
    I'm not sure what premise you are talking about. While I agree with much of what you said after that, I don't really see its connection to what I wrote. Have you noticed the similarity between your second sentence and the opening sentence of Kramer below?
    Sep 13, 2012. 09:58 AM | 1 Like Like |Link to Comment