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  • Fed Needs To Get On Board [View article]
    Sure, I agree our ability to grow has little to do with the Fed and some of the things you list are definitely a drag on growth. It would be nice to fill those millions of skilled jobs. It would be nice if those who are less fortunate to clip news paper want ads a fill a few million more jobs.

    There's low and stagnate wages to consider, there's residual debt to deal with. I believe we're in a period, even if temporarily so, of secular stagnation or a form of low domestic investment demand. At least not of expansion of capacity to absorb the unemployed population since the crisis. There's fiscal policy drag and some post crisis supply side rot which, in some part, may be long term.

    Really, lots of things seem to contribute to sluggish growth. Truth is, with $4.5 trillion balance sheet, there's not much the Fed can do beyond making money available for the private sector to invest where we please. Apparently, investors please to invest where returns and growth can be had. I mean, can't blame anyone, really. It's what we do.

    I just pray we do not resort to currency debasement and further easing as a form of inflation. That would suck as our own currency would fly out of the country seeking returns not found in an ailing domestic economy in need of such massive and extended stimulus which, as it seems, does the domestic economy little good.

    We need our monetary policy dollars invested at home, only then can the fed have done any good. For that, we need returns, yield, and growth. Then, we'll be okay. Folks will train into those higher skilled jobs, or "fake it till they make it." (My sister's motto for landing high paying jobs. It works, apparently.) I just hope employment pushes inflation closer to 2% so we can get out of this easing trap before we risk becoming Japan.
    May 22, 2015. 08:58 AM | Likes Like |Link to Comment
  • Fed Needs To Get On Board [View article]
    "Conservatism has set in at all levels… something that I have mentioned for months now. Governments can't overspend, corporations are further reducing costs and maintaining capital spending equal to depreciation and finally individuals are just plain scared about the economy and our government's inability to lead."

    Or stay at the zero bound forever hoping for a miracle. The US is settling into a slower growth trend that won't employ everyone for a long time. The Fed probably cannot ease enough to reach pre crisis trend lines. Once employment is at a new, lower level of "full employment" based in existing capacity, they're done.
    May 22, 2015. 06:49 AM | Likes Like |Link to Comment
  • Chicago Fed: U.S. Economic Growth Remains Sluggish In April [View article]
    "...but growth remained below the historical trend for the third month in a row."

    This is the muddling through we talked about years ago. This is about as good as it will get for a while. We tend to measure growth to the pre crisis, fully employed economy that no longer exists. We're gonna be below trend despite labor market improvement and due to labor market and supply side slack for some time to come. Only when our own monetary policy invests in something other than EM will we see strong growth. However, despite labor market slack (with low official unemployment, low jobless claims, etc.) we may still see inflation and the Fed will have met it's mandate. Hopefully then we can attract dollar investment in something other than "weak dollar" equities.
    May 22, 2015. 05:28 AM | Likes Like |Link to Comment
  • The Dollar Will Remain The Key Consideration For The Fed [View article]
    While it's true the Fed considers the dollar and it's impact on consumer prices and capital flows, the dollar will become stronger on tightening. It's inevitable and something the Fed will monitor but not necessarily deal with unless the dollar is spiking higher.

    The Fed's mandate is not the dollar, it does not target the floating exchange rate of the currency. It's mandate is price stable inflation though domestic aggregate demand and the zero bound and employed population with a wage capable of taking advantage of new credit.

    If the Fed fights dollar strength, they will never hike rates. Dollar strength is a consequence of easing just as dollar strength will be a consequence of tightening. It's inevitable. Monetary policy is a domestic policy.
    May 21, 2015. 06:47 PM | Likes Like |Link to Comment
  • Lower GDP Growth Will Be New Normal [View article]
    Anyone who blames Obama, or liberal political economics, for the malaise needs to pry themselves from the politically biased media mascarading as news and get a grip on reality. Let's shut off GM's lights and go home...and blame Obama. We'd feel so much better when we have someone to blame. Christ, the ignorance is astounding...
    May 21, 2015. 06:33 AM | Likes Like |Link to Comment
  • What Happened To The QE Skeptics? [View article]
    Well, then, were are US wages, US real estate, and whatever else. Manufacturing, jobs, employment. Oh, yea, the money supply is too tight. Tell that to EM who is growing on our own overly tight stimulus.
    May 21, 2015. 06:23 AM | Likes Like |Link to Comment
  • Fall In Capacity Utilization Reflects The Effective Demand Limit [View article]
    "The graph implies that the economy has reached my estimated effective demand limit and is now reducing capacity utilization to push profits higher. "

    I think this analysis is consistent with my own readings, Particularly if Powell's statement below, of the economy in that our productive capacity will fall to meet a rising - but still slack - labor market. Unfortunately, nether are at pre crisis full capacity and full employment. The economy took a hit during the recession.

    The good news seems to be, even if we are entering a slower growth period and secular stagnation, once demand (lacking any real fiscal stimulus) catches up, we should see inflation and better investment opportunities. As the author states, we may be approaching this post crisis equilibrium, which should be inflationary at a new lower level of full employment, and no further need to supply side stimulus.

    I think this is why the Fed is quantitatively tightening Fed funds while leaving the funds rate low for a while even though there is still a lot of labor market slack relative to the pre crisis era.
    May 17, 2015. 06:57 PM | Likes Like |Link to Comment
  • No Money, No Growth [View article]
    "I personally am skeptical that the MB can influence the value of the USD, so just for kicks, I decided to throw the elements together at the wall and see if something sticks."

    I think the value of the dollar is dependent on not so much the monetary base, per se, but it is dependent on monetary policy and investment flows. The dollar actually strengthened against the euro and the pound since the crisis, probably because these developed regions were also struck by the crisis. The dollar also weakened against growth regions more generally and sometimes quite dramatically especially in EM. But, this was not so much the monetary base and new lending, as domestic inflation is rather mild. This was due, IMO, to capital flight from an ailing economy in need of such stimulus with little investment opportunity into regions that actually returned an attractive yield on their growth.

    The Fed is, of course, primarily concerned with domestic inflation and really kind of had to over do easing beyond the zero bound to have a marginal effect. The effect in the foreign exchange was much more dramatic. The monetary phenomenon of Fed asset purchases occurred in the financial markets, not on main street. That was the role of Treasury collaboration (fiscal policy) giving domestic investment something to sink it's teeth into, namely currency in circulation.

    It is very much like throwing spaghetti at a wall and our economy get's to lick the stain. Personally, I have no faith in supply creating it's own demand, especially when pre crisis capacity already exists at post crisis low levels of aggregate demand. We do not need additional supply side stimulus, we need aggregate demand to consume enough of it to warrant investment.
    May 17, 2015. 06:37 PM | Likes Like |Link to Comment
  • No Money, No Growth [View article]
    "How do you distinguish between E-dollars and U.S. dollars?"

    I do not know how to do that. Any ideas? I just follow the exchange rates in EM (not China) and the behavior of the Yen which is fighting it's own currency strength against the dollar. The yen as been in a global carry trade fro a longtime and there are no "euro" yen, to my knowledge.
    May 17, 2015. 06:25 PM | Likes Like |Link to Comment
  • Tumbling Consumer Confidence Increases Policymakers' Worries [View article]
    "...a weaker dollar is a net negative." Agreed, especially for the global economy. The Fed does not target the dollar, thankfully, it floats on capital flows determined by the free market seeking some actual yield. Elsewhere outside of the very economy in need of it's own stimulus.

    "...being able to accumulate and being able to invest those savings productively" QE returned a lot of money to investors for that purpose.
    May 17, 2015. 10:54 AM | Likes Like |Link to Comment
  • Tumbling Consumer Confidence Increases Policymakers' Worries [View article]
    "But I do believe that the US economy will need stimulus in some form or the other to sustain growth, even if it means sluggish growth as compared to current levels."

    The Japanese thought the same thing. They're still at it. This is the "rates too low for too long" trap that leads to mere currency debasement as a last resort to stoke inflation as our currency flies around the global carry trade stimulating everyone else.
    May 17, 2015. 10:50 AM | Likes Like |Link to Comment
  • Tumbling Consumer Confidence Increases Policymakers' Worries [View article]
    But why would consumption abroad (exports) be preferred over consumption at home. It's not what policy makers want for a reason.
    May 17, 2015. 10:47 AM | Likes Like |Link to Comment
  • Tumbling Consumer Confidence Increases Policymakers' Worries [View article]
    Yea, great link. Higher highs and higher lows. Was just pouring over a range of other charts with similar results and some not so good news. But, in general, seems okay to me. I don't understand why noise is treated as a trend.
    May 17, 2015. 09:12 AM | Likes Like |Link to Comment
  • Tumbling Consumer Confidence Increases Policymakers' Worries [View article]
    "While none of the data suggests that the US is likely to enter into another recession, the data are worrying enough for policymakers."

    Productivity took a dive, etc. So, what seems to be the problem? The Fed made quite a bit of money available, what happened to it? (Rhetorical.) <sigh>

    So, now what, more easing gonna do the trick? Do we have to debase our currency like Japan and send our dollars out into the carry trade? They need to flow into the US, not out of it.
    May 17, 2015. 08:48 AM | 1 Like Like |Link to Comment
  • No Money, No Growth [View article]
    There is a lot of growth, it's just not domestic. I live in EM and new construction is alive and well. Signs of growth are visible, along with signs of trouble (super easy credit, low wages, high prices, etc.) The exchange rate shows an inflow of dollars funding some of it. Maybe much of it. We need the "printed money" doing work at home rather than abroad.
    May 16, 2015. 08:06 PM | Likes Like |Link to Comment