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Given his soft outlook for employment and inflation, the Fed needs to be more accommodative,...

Given his soft outlook for employment and inflation, the Fed needs to be more accommodative, says Minneapolis Fed chief (and former hawk) Kocherlakota. He suggests lowering the unemployment threshold for tightening to 5.5% from 6.5% as his models tell him those magic 100 basis points will increase spending, and drive up employment and prices.
Comments (58)
  • jaych79
    , contributor
    Comments (506) | Send Message
     
    Because it's worked so well so far...
    27 Mar 2013, 02:10 PM Reply Like
  • Ranger94
    , contributor
    Comments (3) | Send Message
     
    It's religion to them. Logic and reason... psst, there is no room for that, if these people (dems& repubs) were just off doing their own thing which they would ruin, we could laugh at the fools from a safe distance. Sadly, THESE people are making decisions that affect our lives....wow. I mean look at someone like the poster spald_fr, they have draw their lines, picked a side, and went all in.Nice and tidy. Ignorance is bliss.
    28 Mar 2013, 12:36 AM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    QE insanity. On wonders to whom he gave the task of adding the red lines to the charts in this poorly written missive, which provides no basis for a link between unemployment, real growth and QE.
    27 Mar 2013, 03:03 PM Reply Like
  • WMARKW
    , contributor
    Comments (10390) | Send Message
     
    Well let's see......simply saying that they will extend accommodation for another 100 basis points will do what? It will raise confidence and allow people who are not as confident today to get more confident and spend more? That spending doesn't have anything to do with the necessity for their to be a rise in real income? Or it doesn't have anything to do with getting a job if you are unemployed? And it certainly doesn't have anything to do with the extreme confidence that you can have the with the implementation of Obama care you are not going to have your work hours cut?

     

    Where do these guys get this stuff?
    27 Mar 2013, 03:57 PM Reply Like
  • spald_fr
    , contributor
    Comments (2728) | Send Message
     
    The bankers will not be satisfied until the middle class is completely wiped out. Our society is changing at break-neck speed, our money slips through our fingers. This is the Great Leap Forward, comrade.
    27 Mar 2013, 05:38 PM Reply Like
  • caupachow
    , contributor
    Comments (394) | Send Message
     
    Is he serious?!
    27 Mar 2013, 04:02 PM Reply Like
  • WMARKW
    , contributor
    Comments (10390) | Send Message
     
    I honestly believe NOW that I have sufficient skills to be a Fed Chief at one of the 12 FR banks. Hmmm....I wonder how much they make?
    27 Mar 2013, 04:06 PM Reply Like
  • jhooper
    , contributor
    Comments (6023) | Send Message
     
    BB makes about 180k a year.
    28 Mar 2013, 07:05 AM Reply Like
  • WMARKW
    , contributor
    Comments (10390) | Send Message
     
    Oh.....well......perhaps my skills are insufficient. Too little pay - too much headache.
    28 Mar 2013, 12:37 PM Reply Like
  • jhooper
    , contributor
    Comments (6023) | Send Message
     
    The incentive structure is that the payoff occurs after you leave a job. So what do you think that says about what drives BB actions?
    28 Mar 2013, 01:56 PM Reply Like
  • WMARKW
    , contributor
    Comments (10390) | Send Message
     
    Oh Dang! There I go being short-sighted again. I should have remembered Clinton - and soon to be Ex-President multi-millionaire Obama.
    28 Mar 2013, 03:41 PM Reply Like
  • Alpha Man
    , contributor
    Comments (253) | Send Message
     
    Could one of you economists explain to me how the dollar dropped 41% between 2001 and 2007?
    28 Mar 2013, 04:35 PM Reply Like
  • wyostocks
    , contributor
    Comments (8067) | Send Message
     
    Since we'll never (least not in the foreseeable future) hit UE of 5.5% it means QE forever.
    27 Mar 2013, 04:46 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    This is a trial balloon, so I think it will happen. Well done Mr. K! We can of course try the German approach of austerity and have great suffering for the people and stock market crashes, but I like happiness better and the American people deserve happiness too.
    27 Mar 2013, 05:00 PM Reply Like
  • jaych79
    , contributor
    Comments (506) | Send Message
     
    Suffer now or suffer later. Either way, suffering will happen. I would rather get it over with.
    27 Mar 2013, 05:02 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    I would rather delay it. Say a hundred years.
    27 Mar 2013, 05:04 PM Reply Like
  • jaych79
    , contributor
    Comments (506) | Send Message
     
    Well I can't blame you for that, but I don't want to see my future grand kids suffer if I can help it. It almost seems that the more we put it off, the worse off society will be when it all comes down.
    27 Mar 2013, 05:07 PM Reply Like
  • pollyserial
    , contributor
    Comments (1092) | Send Message
     
    The American people aren't happy under the QE regime, let's be clear. The people who own America are happy, the people who are owned are getting slowly squeezed to death -- but it's happening slowly enough that they don't realize it. Not so say that we're that much like Cyprus, or Italy, or Spain or, etc. but in each of those cases the owned people went along with the project until the moment they realized it was already too late, the international financial elite had everything and, unfortunately, they were gone. This is exactly what QE is promoting here. People like us here who are somewhat nimble and knowledgeable can scrape some hundred dollar bills off of the side but the people who really profit are our masters.
    27 Mar 2013, 05:19 PM Reply Like
  • Lakeaffect
    , contributor
    Comments (1030) | Send Message
     
    Bingo! Mr. Macro finally reveals his true colors!

     

    For the rest of you, check out this excellent SA article which exposes QE for what it is: http://seekingalpha.co...
    27 Mar 2013, 07:08 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    I think we elected a govt to make it better for us, and not for our future grand kids. Our future grand kids can elect a Govt to make it better for them.
    27 Mar 2013, 07:12 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Would the ordinary people benefit from German style 20-30% unemployment as in Spain?
    27 Mar 2013, 07:13 PM Reply Like
  • Lakeaffect
    , contributor
    Comments (1030) | Send Message
     
    Yes!! Yes!! Yes!! That's what the Robber Barons of the 19th century said. That's what the logger barons of the northwoods said. And the buffalo hunters that nearly exterminated the entire herd. And the indian killers. Might be time to find a new handle, Mr. Macro. Hah!

     

    All your touchy feely liberal rants have had the cover ripped off them. You are exposed!
    27 Mar 2013, 07:17 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    It is not liberal to wish a better life for contemporary Americans?
    27 Mar 2013, 07:19 PM Reply Like
  • pollyserial
    , contributor
    Comments (1092) | Send Message
     
    Macro: QE and austerity/fiscal stimulus are not the same coin, at all. What has doomed Europe is a combination of welfare for the banks (LTRO etc. and austerity ie cutbacks to government payrolls, lack of investment in infrastructure, etc.) Which is exactly what we are doing here, at this point. I think that the stimulus programs of 2009-11 were excellent uses of resources. TARP etc. similarly, they were necessary. Ongoing bubble blowing because Bernanke et al don't know what else to do is not: wages are down, employment is not getting better, real goods cost more and people's paychecks are smaller. I like money, but I like people more. I think you need to recognize that while you and I (and the banks) benefit from these programs, a mother of three with 3 jobs really doesn't get much of a 'wealth effect'. Iceland told the bankers to take a hike and spent the money on infrastructure -- look at them now. Italy, Spain, et al decided to try the other pill. Look at them now.
    (btw I think that it's very possible that the Germans just effectively ended the Euro by overstepping on Cyprus. Italians are heading to elections and are must have watched what just happened to Cyprus with horror. Bersani threw up his hands today. Italian default looks more and more possible by the day.)
    27 Mar 2013, 09:02 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    So the main argument to end QEternity is that a mother of three with 3 jobs is not benefiting from it?

     

    Europe is suffering because Germany is imposing austerity left right and center. That's what so many folks want for the USA too. They must like Spain style 20-30% unemployment.
    27 Mar 2013, 10:00 PM Reply Like
  • pollyserial
    , contributor
    Comments (1092) | Send Message
     
    QE and austerity are not related. Fiscal stimulus and monetary stimulus are not the same thing. I am arguing in favor of fiscal stimulus and against further monetary stimulus.

     

    And, to be clear, it is not just a mother of 3, but honestly anyone who isn't in the top 10% of wealth that I'm talking about. Those who are wealthy, benefit proportionately, obviously, so your and my take is much less than say Stephen Cohen's. But, my main point is, it's not helping as much as fiscal stimulus would and it's not fair.
    27 Mar 2013, 10:13 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Ah I see. That I can agree with. I would love some fiscal stimulus in the USA but the Republicans would never allow that. So monetary stimulus is all we got. I do agree with you though that now is no time for balancing budgets. We should borrow like hell and invest in the country. QEternity does help the borrowing by lowering interest rates.
    27 Mar 2013, 10:18 PM Reply Like
  • WMARKW
    , contributor
    Comments (10390) | Send Message
     
    I would say we're getting just over $1Trillion a year in fiscal stimulus right now... and we have been for what - nigh on 5 years.
    27 Mar 2013, 11:23 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Let's make it another 5 Mark.
    27 Mar 2013, 11:31 PM Reply Like
  • minecanary
    , contributor
    Comments (463) | Send Message
     
    You seem to prefer the future the German kids had in the 40's...the ones w/blue eyes and blonde hair anyway.
    28 Mar 2013, 10:08 AM Reply Like
  • Alpha Man
    , contributor
    Comments (253) | Send Message
     
    Let's see, it only took 13 years for unemployment to recover after the Great Depression. Perhaps we could revisit that approach?
    28 Mar 2013, 04:36 PM Reply Like
  • Alpha Man
    , contributor
    Comments (253) | Send Message
     
    I bet the 5 million that have gained jobs since the trough are happer then those that haven't
    28 Mar 2013, 04:37 PM Reply Like
  • Alpha Man
    , contributor
    Comments (253) | Send Message
     
    Say, who was President when this mess got started?
    28 Mar 2013, 04:38 PM Reply Like
  • Alpha Man
    , contributor
    Comments (253) | Send Message
     
    One could make a lot of money shorting the market
    28 Mar 2013, 04:39 PM Reply Like
  • Alpha Man
    , contributor
    Comments (253) | Send Message
     
    " I am arguing in favor of fiscal stimulus" You mean a conservative that wants more deficit spending.

     

    How are the wealthy benefitting, owning businesses that have customers that have money to spend and employ people?
    28 Mar 2013, 04:41 PM Reply Like
  • Alpha Man
    , contributor
    Comments (253) | Send Message
     
    If the Repubs implemented some good old austerity and you lost your job (ala Europe), you'd be crying like a B$tch.
    28 Mar 2013, 04:42 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    And blame your job loss on the Dems.
    28 Mar 2013, 05:18 PM Reply Like
  • mcostigane
    , contributor
    Comments (44) | Send Message
     
    a year ago this guy was vehemently arguing against additional QE

     

    they are literally making it up as they go
    27 Mar 2013, 06:30 PM Reply Like
  • pollyserial
    , contributor
    Comments (1092) | Send Message
     
    They're terrified that the stock market will go down 5 points on their watch.
    27 Mar 2013, 10:14 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Or may be they want 5.5% unemployment. Which of course is horrible as what USA needs is Euro style 20-30% unemployment from austerity and very tight money supply.
    28 Mar 2013, 12:13 AM Reply Like
  • Robert Duval
    , contributor
    Comments (4075) | Send Message
     
    Why don't they go all in then; if its working so well?

     

    85 B in MBS / Treasuries;
    85 B more in Corp bonds;

     

    Target 5% inflation;

     

    prohibit spec trading in energy futures;
    prohibit holding gold.

     

    Pay 1 or more % per year to the bank for all amounts heald in savings accounts (negative interest)
    27 Mar 2013, 06:54 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Why prohibit holding gold when people can make money shorting gold?
    28 Mar 2013, 12:12 AM Reply Like
  • minecanary
    , contributor
    Comments (463) | Send Message
     
    It's not working well. How anybody can't see that after 5 years of more, more, more is beyond me...except those that taking part in the pillaging w/this approach.

     

    Only 2 things come from Minnesota, son. Hawks ain't one of them. Not that there is anything wrong w/that.
    27 Mar 2013, 07:04 PM Reply Like
  • EK1949
    , contributor
    Comments (1565) | Send Message
     
    Macro is correct, the problem with monetary stimulus is that it can only do so much without the fiscal stimulus it's designed to support.

     

    "we're getting just over $1Trillion a year in fiscal stimulus right now... and we have been for what - nigh on 5 years."

     

    There are a couple of ways to look at this, a smart way and a dumb one. The dumb one goes first, and it's "if $1T isn't enough, less will be better". The smart way is "how much does it take to fix the problem?"

     

    The reason people prefer the dumb answer is it doesn't challenge the prejudice against deficits high enough to overcome a steep decline like we experienced.

     

    The pattern is familiar: In the early stages of a financial meltdown the stark fear of the oncoming depression cause policy makers to abandon their foolish notions for genuine remedies. So at first we get a bank fix, dirty but effective, then a stimulus bill. This is where things go seriously wrong. As fear subsides, thought is once again replaced by the olde tyme religion of debt phobia. Hooray, it's safe to be dumb again! The stimulus is deliberately undersized, good enough to reduce unemployment to single digits but weak enough to keep the patient anemic for years.

     

    So, back to the smart side. How big would a really effective deficit be? At this stage it probably wouldn't have to be all that big. I'd cancel every sequester permanently, abolish the payroll tax and put together an infrastructure and jobs bill, including a sizable mass transit component.

     

    The rationale is obvious with unobvious corollaries: Red State infrastructure projects reduce the subsidy Blue Staters need to pay, while Blue State infrastructure makes it easier to pay the subsidies and make the country (meaning the cities) richer. Man, that's a no-brainer, send your dollars to the MBTA and make the country rich!
    28 Mar 2013, 12:08 AM Reply Like
  • jhooper
    , contributor
    Comments (6023) | Send Message
     
    Here are some interesting state maps.

     

    http://bit.ly/X5QcTf

     

    http://bit.ly/XUvuD8

     

    http://bit.ly/YKTfQb
    28 Mar 2013, 04:44 PM Reply Like
  • WMARKW
    , contributor
    Comments (10390) | Send Message
     
    "How big would a really effective deficit be? At this stage it probably wouldn't have to be all that big. I'd cancel every sequester permanently, abolish the payroll tax and put together an infrastructure and jobs bill, including a sizable mass transit component. "

     

    You hit in the issue - effectiveness. First question is does the government have the ability to do anything effectively? That's a serious question. If a $Trillion plus a year isn't doing the job, perhaps its because it's ineffective in the first place.

     

    1. I'd agree with abolishing the payroll tax
    2. I'd eliminate all corporate taxes - they are stupid as virtually anything the corporation can do with additional net income will cause a future tax liability (example bonuses), in many cases at higher effective rates than the overal corporate rate anyway.
    3. I'd spend $1 Trillion on nuke power plants (200). Pay private sector to build them now under executive order - nothing but minimal environmental studies done. (The government can auction them off once built to highest bidder from local power industry)
    4. No more unemployment compensation (except rare circumstances). Instead you get paid to go to school. You get paid more for certain kinds of degrees.
    5. To go along with the 200 nuke plants will be investment in both electric vehicles and CNG infrastructure. 50 million electric vehicles at $20,000 each. Underwritten by government and sold on EBAY to highest bidder. CNG infrastructure with tax incentives for investment and ownership of vehicles.
    6. Nuke plants and electric/CNG vehicles will save $200 bil a year in imported fuel.
    7. Allow corporations to repatriate cash from out of country with no tax impact if they invest in U.S. business activities.

     

    There are tons of other things that guys alot smarter than me can come up with.....but apparently, the guys in the government are content with building a "bridge to nowhere". Perhaps they don't really want things to get better?
    28 Mar 2013, 12:51 PM Reply Like
  • DigDeep
    , contributor
    Comments (2371) | Send Message
     
    EK "The smart way is "how much does it take to fix the problem?"

     

    thinking the gov't and massive central planning will provide sustainable results for the bottom 90%....is folly.
    28 Mar 2013, 01:58 PM Reply Like
  • Alpha Man
    , contributor
    Comments (253) | Send Message
     
    Tell me how tax cus for the wealthy have helped?
    28 Mar 2013, 04:46 PM Reply Like
  • WMARKW
    , contributor
    Comments (10390) | Send Message
     
    Tell me if we are deficit spending a Trillion plus a year, why we have any income tax at all? Certainly not to fund the government - they have demonstrated they can do that all by themselves. Therefore taxes are just a form of wealth redistribution - right? Let's call it for what it is.
    28 Mar 2013, 04:55 PM Reply Like
  • jhooper
    , contributor
    Comments (6023) | Send Message
     
    Yeah, expropriation taxes (income taxes) don't fund the gov. They just cancel Fed notes, which mean less Fed notes for transactions and bidding up asset prices. So the whole "tax cuts for the rich haven't done anything" is an argument based on a false assumption about how a gov under our monetary system gets funded.
    28 Mar 2013, 05:18 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Yes, it is, and it should be.
    28 Mar 2013, 05:19 PM Reply Like
  • jhooper
    , contributor
    Comments (6023) | Send Message
     
    "Therefore taxes are just a form of wealth redistribution - right?"

     

    Absolutely, and only morons would advocate for wealth redistribution. A society cannot steal its way to prosperity. Only knuckle dragging troglodytes think that. That's because they think from a primitive perspective. If they really believed in wealth redistribution, they would start with their own, but they never do. Instead they spend their time on comment threads bragging about how much they care instead of going out and showing everyone how much they care by redistributing what they own. Wait till you hear the excuses for why they won't practice what they preach.
    28 Mar 2013, 06:24 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Guess what hoops, you still have to pay your taxes.
    28 Mar 2013, 09:11 PM Reply Like
  • jhooper
    , contributor
    Comments (6023) | Send Message
     
    Studies have shown that 2.3 people die as a result of those that preach redistribution commenting on threads instead of out practicing what they preach. The real question is, "How many are they willing to let die so they can brag about how wonderful they are instead of actually doing what they say should be done?"
    28 Mar 2013, 09:33 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    You still have to pay your taxes.
    28 Mar 2013, 09:34 PM Reply Like
  • jhooper
    , contributor
    Comments (6023) | Send Message
     
    There goes 2.3 more. Apparently some people just don't care.
    28 Mar 2013, 09:38 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9049) | Send Message
     
    Taxes.
    28 Mar 2013, 11:19 PM Reply Like
  • jhooper
    , contributor
    Comments (6023) | Send Message
     
    And the body count mounts. Some people refuse to practice what they preach.
    29 Mar 2013, 06:11 AM Reply Like
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