viernes, 28 de diciembre de 2012
lunes, 24 de diciembre de 2012
sábado, 22 de diciembre de 2012
viernes, 21 de diciembre de 2012
miércoles, 19 de diciembre de 2012
martes, 18 de diciembre de 2012
lunes, 17 de diciembre de 2012
domingo, 16 de diciembre de 2012
Mistaking models for reality (Is macro rotten?)
Simon Wren-Lewis y Mark Thoma
Simon Wren-Lewis: The New Classical Revolution: Technical or Ideological?
Mark Thoma: Is macro rotten?
Noah Smith
Brad DeLong vs Steve Williamson
Paul Krugman le responde a Noah Smith
Matias Vernengo
Scott Sumner
Scott Sumner vs Noah Smith. Lars Christensen comenta
David Glasner
The state of macroeconomics: it all went wrong in 1958
Simon Wren-Lewis: The New Classical Revolution: Technical or Ideological?
Mark Thoma: Is macro rotten?
Noah Smith
Brad DeLong vs Steve Williamson
Paul Krugman le responde a Noah Smith
Matias Vernengo
Scott Sumner
Scott Sumner vs Noah Smith. Lars Christensen comenta
David Glasner
The state of macroeconomics: it all went wrong in 1958
viernes, 14 de diciembre de 2012
jueves, 13 de diciembre de 2012
miércoles, 12 de diciembre de 2012
martes, 11 de diciembre de 2012
lunes, 10 de diciembre de 2012
Sobre el impacto de la tecnologìa en el empleo
Paul Krugman inicia el debate. Comenta Nick Rowe
Krugman otra vez. Yves Smith comenta
Otro comentario, criticando el paradigma neoclasico
The cult of price stability is killing american workers
Otra vez Krugman. Matias Vernengo critica a Krugman y a la teoria neoclasica de la distribuciòn
FT Alphaville: the robot economy and the new rentier class
Blogs review: Robots, capital-biased technological change and inequality
Krugman otra vez
Another take on robots, in light of Marx and the TSSI
Nick Rowe
Un ejemplo de Krugman. Matias Vernengo de nuevo lo critica
Tyler Cowen: What are the policy implications of capital-biased technological change?
Krugman otra vez. Yves Smith comenta
Otro comentario, criticando el paradigma neoclasico
The cult of price stability is killing american workers
Otra vez Krugman. Matias Vernengo critica a Krugman y a la teoria neoclasica de la distribuciòn
FT Alphaville: the robot economy and the new rentier class
Blogs review: Robots, capital-biased technological change and inequality
Krugman otra vez
Another take on robots, in light of Marx and the TSSI
Nick Rowe
Un ejemplo de Krugman. Matias Vernengo de nuevo lo critica
Tyler Cowen: What are the policy implications of capital-biased technological change?
viernes, 7 de diciembre de 2012
jueves, 6 de diciembre de 2012
martes, 4 de diciembre de 2012
lunes, 3 de diciembre de 2012
domingo, 2 de diciembre de 2012
jueves, 29 de noviembre de 2012
martes, 27 de noviembre de 2012
domingo, 25 de noviembre de 2012
sábado, 24 de noviembre de 2012
martes, 20 de noviembre de 2012
domingo, 18 de noviembre de 2012
sábado, 17 de noviembre de 2012
viernes, 16 de noviembre de 2012
jueves, 15 de noviembre de 2012
martes, 13 de noviembre de 2012
sábado, 10 de noviembre de 2012
sábado, 3 de noviembre de 2012
viernes, 2 de noviembre de 2012
martes, 30 de octubre de 2012
lunes, 29 de octubre de 2012
domingo, 28 de octubre de 2012
sábado, 27 de octubre de 2012
jueves, 25 de octubre de 2012
Misunderstanding financial crises. Entrevista a Gary Gorton
Aca
"We know from the data that when there is less government debt outstanding, the private sector creates private “safe” substitutes. If there is more government debt outstanding, the privately-created “safe” debt shrinks. This is because of the demand in the economy for “safe” assets.
Privately-produced safe debt can be created without being vulnerable to bank runs with the right regulation. It would be better for the government to oversee the creation of privately-produced safe debt than to try to create enough government debt to meet the demand."
Reseña del libro de Gorton
"We know from the data that when there is less government debt outstanding, the private sector creates private “safe” substitutes. If there is more government debt outstanding, the privately-created “safe” debt shrinks. This is because of the demand in the economy for “safe” assets.
Privately-produced safe debt can be created without being vulnerable to bank runs with the right regulation. It would be better for the government to oversee the creation of privately-produced safe debt than to try to create enough government debt to meet the demand."
Reseña del libro de Gorton
miércoles, 24 de octubre de 2012
lunes, 22 de octubre de 2012
Es el dinero una burbuja?
Noah Smith critica a Stephen Williamson. Brad DeLong y Paul Krugman tambièn
David Andolfatto y Stephen Williamson responden
David Glasner
Nick Rowe
JP Koning. Nick Rowe
David Andolfatto y Stephen Williamson responden
David Glasner
Nick Rowe
JP Koning. Nick Rowe
viernes, 19 de octubre de 2012
jueves, 18 de octubre de 2012
miércoles, 17 de octubre de 2012
martes, 16 de octubre de 2012
lunes, 15 de octubre de 2012
Nobel de Shapley y Roth
sábado, 13 de octubre de 2012
What do people mean by helicopter money?
Simon Wren-Lewis
Más de Wren-Lewis. Y David Beckworth
Martin Wolf: The case for helicopter money:
"Those convinced hyperinflation is around the corner believe that banks expand their lending in direct response to their holdings of reserves at the central bank. Under a gold standard, reserves are indeed limited. Banks need to look at them rather carefully.
Under fiat (that is, government-made) money, however, the supply of reserves is potentially infinite. True, central banks can pretend reserves are limited. In practice, however, central banks will advance reserves without limit to any solvent bank (and, as we have seen, to insolvent ones). With central banks able to supply reserves at will, the constraints on lending are solvency and profitability. Expanding banking reserves is an ineffective way to increase lending, not a
dangerous one.
...
First, it is impossible to justify the conventional view that fiat money should operate almost exclusively via today’s system of private borrowing and lending. Why should state-created currency be predominantly employed to back the money created by banks as a byproduct of often irresponsible lending? Why is it good to support the leveraging of private property, but not the supply of public infrastructure? I fail to see any moral force to the idea that fiat money should only promote private, not public, spending.
Martin Wolf: The case for helicopter money:
"Those convinced hyperinflation is around the corner believe that banks expand their lending in direct response to their holdings of reserves at the central bank. Under a gold standard, reserves are indeed limited. Banks need to look at them rather carefully.
Under fiat (that is, government-made) money, however, the supply of reserves is potentially infinite. True, central banks can pretend reserves are limited. In practice, however, central banks will advance reserves without limit to any solvent bank (and, as we have seen, to insolvent ones). With central banks able to supply reserves at will, the constraints on lending are solvency and profitability. Expanding banking reserves is an ineffective way to increase lending, not a
dangerous one.
...
First, it is impossible to justify the conventional view that fiat money should operate almost exclusively via today’s system of private borrowing and lending. Why should state-created currency be predominantly employed to back the money created by banks as a byproduct of often irresponsible lending? Why is it good to support the leveraging of private property, but not the supply of public infrastructure? I fail to see any moral force to the idea that fiat money should only promote private, not public, spending.
viernes, 12 de octubre de 2012
Brad DeLong sobre la equivalencia entre Hicks y Fisher
Aca
Back in 1937 John Hicks pointed out a symmetry between Fisherian monetary approaches and Wicksellian financial approaches to macroeconomics. Fisherian monetary approaches looked at how people divided their income between accumulating or decumulating liquidity and spending on other commodities in the context of an interest rate r that is determined someplace else. It was thus an incomplete theory. Wicksellian financial approaches looked at how people divided their income between accumulating or decumulating savings vehicles (including outside money) and spending on currently-produced goods and services in the context of an interest rate r that is determined someplace else.
First, it's a mistake, Hicks said, to complain that finance is absent from a Fisherian monetary approach--for finance is what determines the real interest rate r needed to make sense of MV(r+π) = PY.
And, second, Hicks said, it is a mistake to complain that money is absent from a Wicksellian financial framework--for money is what determines the nominal interest rate i needed to make sense of S(Y) = I(i-π, r*) + (G-T).
Back in 1937 John Hicks pointed out a symmetry between Fisherian monetary approaches and Wicksellian financial approaches to macroeconomics. Fisherian monetary approaches looked at how people divided their income between accumulating or decumulating liquidity and spending on other commodities in the context of an interest rate r that is determined someplace else. It was thus an incomplete theory. Wicksellian financial approaches looked at how people divided their income between accumulating or decumulating savings vehicles (including outside money) and spending on currently-produced goods and services in the context of an interest rate r that is determined someplace else.
First, it's a mistake, Hicks said, to complain that finance is absent from a Fisherian monetary approach--for finance is what determines the real interest rate r needed to make sense of MV(r+π) = PY.
And, second, Hicks said, it is a mistake to complain that money is absent from a Wicksellian financial framework--for money is what determines the nominal interest rate i needed to make sense of S(Y) = I(i-π, r*) + (G-T).
miércoles, 10 de octubre de 2012
martes, 9 de octubre de 2012
Underestimating fiscal policy multipliers
lunes, 8 de octubre de 2012
viernes, 5 de octubre de 2012
miércoles, 3 de octubre de 2012
martes, 2 de octubre de 2012
lunes, 1 de octubre de 2012
domingo, 30 de septiembre de 2012
What have the economists ever done for us?
Artículo de Andy Haldane
"One strain of this virus is an old one. Cycles in money and bank credit are familiar from centuries past. And yet, for perhaps a generation, the symptoms of this old virus were left untreated. That neglect allowed the infection to spread from the financial system to the real economy, with near-fatal consequences for both.
In many ways, this was an odd disease to have contracted. The symptoms should have been all too obvious from history. The interplay of bank money and credit and the wider economy has been pivotal to the mandate of central banks for centuries. For at least a century, that was recognised in the design of public policy frameworks. The management of bank money and credit was a clear public policy prerequisite for maintaining broader macroeconomic and social stability.
Two developments – one academic, one policy-related – appear to have been responsible for this surprising memory loss. The first was the emergence of micro-founded dynamic stochastic general equilibrium (DGSE) models in economics. Because these models were built on real-business-cycle foundations, financial factors (asset prices, money and credit) played distinctly second fiddle, if they played a role at all.
The second was an accompaying neglect for aggregate money and credit conditions in the construction of public policy frameworks. Inflation targeting assumed primacy as a monetary policy framework, with little role for commercial banks' balance sheets as either an end or an intermediate objective. And regulation of financial firms was in many cases taken out of the hands of central banks and delegated to separate supervisory agencies with an institution-specific, non-monetary focus.
...
Second, it underlines the importance of reinstating money, credit and banking in the core curriculum, as well as refocusing on models of the interplay between economic and financial systems. These are areas that also fell out of fashion during the pre-crisis boom.
Third, the crisis showed that institutions really matter, be it commercial banks or central banks, when making sense of crises, their genesis and aftermath. They too were conveniently, but irresponsibly, airbrushed out of workhorse models. They now needed to be repainted back in."
Simon Wen-Lewis comenta
"One strain of this virus is an old one. Cycles in money and bank credit are familiar from centuries past. And yet, for perhaps a generation, the symptoms of this old virus were left untreated. That neglect allowed the infection to spread from the financial system to the real economy, with near-fatal consequences for both.
In many ways, this was an odd disease to have contracted. The symptoms should have been all too obvious from history. The interplay of bank money and credit and the wider economy has been pivotal to the mandate of central banks for centuries. For at least a century, that was recognised in the design of public policy frameworks. The management of bank money and credit was a clear public policy prerequisite for maintaining broader macroeconomic and social stability.
Two developments – one academic, one policy-related – appear to have been responsible for this surprising memory loss. The first was the emergence of micro-founded dynamic stochastic general equilibrium (DGSE) models in economics. Because these models were built on real-business-cycle foundations, financial factors (asset prices, money and credit) played distinctly second fiddle, if they played a role at all.
The second was an accompaying neglect for aggregate money and credit conditions in the construction of public policy frameworks. Inflation targeting assumed primacy as a monetary policy framework, with little role for commercial banks' balance sheets as either an end or an intermediate objective. And regulation of financial firms was in many cases taken out of the hands of central banks and delegated to separate supervisory agencies with an institution-specific, non-monetary focus.
...
Second, it underlines the importance of reinstating money, credit and banking in the core curriculum, as well as refocusing on models of the interplay between economic and financial systems. These are areas that also fell out of fashion during the pre-crisis boom.
Third, the crisis showed that institutions really matter, be it commercial banks or central banks, when making sense of crises, their genesis and aftermath. They too were conveniently, but irresponsibly, airbrushed out of workhorse models. They now needed to be repainted back in."
Simon Wen-Lewis comenta
Sobre la crisis en Francia
Ambrose Evans-Pritchard
"The whole economic structure of France is an anachronism in a Chinese world and a German currency union."
"The whole economic structure of France is an anachronism in a Chinese world and a German currency union."
viernes, 28 de septiembre de 2012
jueves, 27 de septiembre de 2012
miércoles, 26 de septiembre de 2012
martes, 25 de septiembre de 2012
lunes, 24 de septiembre de 2012
domingo, 23 de septiembre de 2012
Bernanke's little depression
David Beckworth sobre la columna de Ambrose Evans-Pritchard
"To be clear, the Market Monetarist's view is not that the Fed deliberately caused the Little Depression, but rather that the Fed failed to fully respond to a number of developments over the past four years that significantly raised the demand for money: the U.S. collapse in 2008-2009, the Eurozone Crisis of 2010-present, and the debt ceiling crisis of 2011. We don't see these events dramatically changing the productive capacity of the U.S. economy over this time, but we do see them increasing the demand for money and other safe assets because of the economic uncertainty they created. The Fed could have met this spike in demand for liquidity by better managing expectations about future nominal income. The Fed's failure to do so amounts to what we call a passive tightening."
"To be clear, the Market Monetarist's view is not that the Fed deliberately caused the Little Depression, but rather that the Fed failed to fully respond to a number of developments over the past four years that significantly raised the demand for money: the U.S. collapse in 2008-2009, the Eurozone Crisis of 2010-present, and the debt ceiling crisis of 2011. We don't see these events dramatically changing the productive capacity of the U.S. economy over this time, but we do see them increasing the demand for money and other safe assets because of the economic uncertainty they created. The Fed could have met this spike in demand for liquidity by better managing expectations about future nominal income. The Fed's failure to do so amounts to what we call a passive tightening."
sábado, 22 de septiembre de 2012
miércoles, 19 de septiembre de 2012
martes, 18 de septiembre de 2012
lunes, 17 de septiembre de 2012
Keynes sobre la banca
Aca
"[The banks] stand between the real borrower and the real lender. They have given their guarantee to the real lender; and this guarantee is only good if the money value of the asset belonging to the real borrower is worth the money which has been advanced on it."
"[The banks] stand between the real borrower and the real lender. They have given their guarantee to the real lender; and this guarantee is only good if the money value of the asset belonging to the real borrower is worth the money which has been advanced on it."
domingo, 16 de septiembre de 2012
jueves, 13 de septiembre de 2012
QE3
Felix Salmon describe la medida. Y aca
Anàlisis de Cullen Roche, Scott Sumner, otro de Sumner, otro, The Economist, otro de The Economist, otro, Paul Krugman, David Glasner, Cullen Roche, James Hamilton, Paul Krugman, comentario de Cullen Roche a Krugman, Bill Woolsey. Otra vez The Economist
Resumen
Yves Smith dice que los QEs no han bajado las tasas de prestamo
Seeking Alpha
George Selgin sobre la victoria de los 'market monetarists'. Scott Sumner comenta. Scott Sumner sobre las raìces de los 'market monetarists'.
Great Tips-pectations
Discurso de Charles Evans de la Fed de Chicago
A flaw in the QE expectational transmission mechanism?
INET
QE3 and the Fed's shaping of global monetary policy
Reacciones de Scott Sumner, David Andolfatto y David Glasner a James Bullard
The Economist sobre el nuevo consenso dentro de la Fed
Tim Duy y Brad DeLong vs John Taylor y Phil Gramm
Trickle-down central banking
Anàlisis de Cullen Roche, Scott Sumner, otro de Sumner, otro, The Economist, otro de The Economist, otro, Paul Krugman, David Glasner, Cullen Roche, James Hamilton, Paul Krugman, comentario de Cullen Roche a Krugman, Bill Woolsey. Otra vez The Economist
Resumen
Yves Smith dice que los QEs no han bajado las tasas de prestamo
Seeking Alpha
George Selgin sobre la victoria de los 'market monetarists'. Scott Sumner comenta. Scott Sumner sobre las raìces de los 'market monetarists'.
Great Tips-pectations
Discurso de Charles Evans de la Fed de Chicago
A flaw in the QE expectational transmission mechanism?
INET
QE3 and the Fed's shaping of global monetary policy
Reacciones de Scott Sumner, David Andolfatto y David Glasner a James Bullard
The Economist sobre el nuevo consenso dentro de la Fed
Tim Duy y Brad DeLong vs John Taylor y Phil Gramm
Trickle-down central banking
miércoles, 12 de septiembre de 2012
martes, 11 de septiembre de 2012
Is the Fed really causing the sustained drop in interest rates?
Aca
"...this story falls apart because it ignores the fact that the term structure of the natural interest rate--the interest rate driven by the fundamentals of the economy--is being compressed too. That is, given the weakened state of the economy the demand for credit is down, desired savings is up, and interest rates are falling as a result."
"To believe the Fed is directly responsible for the low interest rates, one must believe it is capable of pushing the yield on the 10-year treasury from just above 5% to about 1.5% over a 5-year period. That gives the Fed way too much credit. ...
One can say, however, the Fed has failed to sufficiently respond to the heightened money demand created by these shocks and therefore has failed to stabilize aggregate nominal spending. This failure to act has allowed an economic slump to materialize which in turn has temporarily pulled down the natural interest rate. So, indirectly the Fed has been harming savers, investors, and financial intermediaries, just not in the way most observers believe."
"...this story falls apart because it ignores the fact that the term structure of the natural interest rate--the interest rate driven by the fundamentals of the economy--is being compressed too. That is, given the weakened state of the economy the demand for credit is down, desired savings is up, and interest rates are falling as a result."
"To believe the Fed is directly responsible for the low interest rates, one must believe it is capable of pushing the yield on the 10-year treasury from just above 5% to about 1.5% over a 5-year period. That gives the Fed way too much credit. ...
One can say, however, the Fed has failed to sufficiently respond to the heightened money demand created by these shocks and therefore has failed to stabilize aggregate nominal spending. This failure to act has allowed an economic slump to materialize which in turn has temporarily pulled down the natural interest rate. So, indirectly the Fed has been harming savers, investors, and financial intermediaries, just not in the way most observers believe."
lunes, 10 de septiembre de 2012
domingo, 9 de septiembre de 2012
jueves, 6 de septiembre de 2012
miércoles, 5 de septiembre de 2012
martes, 4 de septiembre de 2012
La fàbula de las canicas y la maestra
Aca
Ahora creo que todos hemos aprendido la lección. Todos debemos vivir dentro de nuestras posibilidades en nuestra vida particular. Sin embargo, los que en una economía tienen el poder único y absoluto de crear el medio de intercambio de bienes y servicios, tienen la obligación de asegurar que siempre haya un suministro suficiente de canicas para que todos podamos jugar.
Y todos aprendieron la lección y todos supieron que en un sistema monetario fiduiciario el dinero no tiene valor intrínseco y que aquel que lo genera siempre puede y DEBE crear todos aquellos papelitos necesarios para garantizar que cualquier niño que haga su trabajo pueda salir de clase a jugar con su amigo Walter, y para que puedan dormir con sus familias después de haber hecho bien su trabajo.
Ahora creo que todos hemos aprendido la lección. Todos debemos vivir dentro de nuestras posibilidades en nuestra vida particular. Sin embargo, los que en una economía tienen el poder único y absoluto de crear el medio de intercambio de bienes y servicios, tienen la obligación de asegurar que siempre haya un suministro suficiente de canicas para que todos podamos jugar.
Y todos aprendieron la lección y todos supieron que en un sistema monetario fiduiciario el dinero no tiene valor intrínseco y que aquel que lo genera siempre puede y DEBE crear todos aquellos papelitos necesarios para garantizar que cualquier niño que haga su trabajo pueda salir de clase a jugar con su amigo Walter, y para que puedan dormir con sus familias después de haber hecho bien su trabajo.
lunes, 3 de septiembre de 2012
domingo, 2 de septiembre de 2012
viernes, 31 de agosto de 2012
Paper de Michael Woodford en Jackson Hole
'Methods of policy accomodation at the interest rate lower bound'
Resumen
Anàlisis de David Beckworth
Paul Krugman aca y aca
Gavyn Davies sobre el discurso de Bernanke y el paper de Woodford: US monetary policy at an important turning point
David Glasner sobre el discurso de Bernanke
"The reductions in long-term interest rates reflect not the success of QE, but its failure. Why was QE a failure? Because the only way in which QE could have provided an economic stimulus was by increasing total spending (nominal GDP) which would have meant rising prices that would have called forth an increase in output. The combination of rising prices and rising output would have caused expected real yields and expected inflation to rise, thereby driving nominal interest rates up, not down. The success of QE would have been measured by the extent to which it would have produced rising, not falling, interest rates."
Relacionado: Mainstream economists do not understand how monetary policy is transmitted
Bill Woolsey
John Taylor
Cullen Roche
Scott Sumner critica a John Cochrane. Bill Woolsey tambien
Nick Rowe
Simon Wren-Lewis. Bill Woolsey le responde
David Glasner
Más de Scott Sumner
James Hamilton
John Cochrane, Michael Woodford, and the efficacy of monetary policy
Joseph Gagnon: Michael Woodford’s unjustified skepticism on portfolio balance
Mike Woodford still does not understand endogenous money
Resumen
Anàlisis de David Beckworth
Paul Krugman aca y aca
Gavyn Davies sobre el discurso de Bernanke y el paper de Woodford: US monetary policy at an important turning point
David Glasner sobre el discurso de Bernanke
"The reductions in long-term interest rates reflect not the success of QE, but its failure. Why was QE a failure? Because the only way in which QE could have provided an economic stimulus was by increasing total spending (nominal GDP) which would have meant rising prices that would have called forth an increase in output. The combination of rising prices and rising output would have caused expected real yields and expected inflation to rise, thereby driving nominal interest rates up, not down. The success of QE would have been measured by the extent to which it would have produced rising, not falling, interest rates."
Relacionado: Mainstream economists do not understand how monetary policy is transmitted
Bill Woolsey
John Taylor
Cullen Roche
Scott Sumner critica a John Cochrane. Bill Woolsey tambien
Nick Rowe
Simon Wren-Lewis. Bill Woolsey le responde
David Glasner
Más de Scott Sumner
James Hamilton
John Cochrane, Michael Woodford, and the efficacy of monetary policy
Joseph Gagnon: Michael Woodford’s unjustified skepticism on portfolio balance
Mike Woodford still does not understand endogenous money
The negative unnatural rate of interest
Aca
"The word natural is always used to hide the constructed context in which an outcome occurs, to disguise human institutions as immutable facts and thereby exclude them from controversy."
...
"Ultimately, the words are meaningless. The level of interest rates that prevails in the market will be the result of a mix of institutional choices and economic circumstances."
"The word natural is always used to hide the constructed context in which an outcome occurs, to disguise human institutions as immutable facts and thereby exclude them from controversy."
...
"Ultimately, the words are meaningless. The level of interest rates that prevails in the market will be the result of a mix of institutional choices and economic circumstances."
jueves, 30 de agosto de 2012
miércoles, 29 de agosto de 2012
Is US economic growth over? Faltering innovation ocnfronts the six headwinds
Paper de Robert Gordon. Comentarios de Paul Krugman, Noah Smith, FT Alphaville, Annie Lowrey
Matias Vernengo
The Economist
Crítica al paper de Gordon
Karl Smith
El paper en VoxEU
Una respuesta a Gordon. La gente parece preferir estar conectada a tener alcantarillado
The Economist
Acemoglu y Robinson: The end of low hanging fruit? Tyler Cowen responde
Matias Vernengo
The Economist
Crítica al paper de Gordon
Karl Smith
El paper en VoxEU
Una respuesta a Gordon. La gente parece preferir estar conectada a tener alcantarillado
The Economist
Acemoglu y Robinson: The end of low hanging fruit? Tyler Cowen responde
martes, 28 de agosto de 2012
The very short run
Nick Rowe
Brad DeLong: The keynesian multiplier and the monetary hot potato
"From my perspective the Old Monetarist story doesn't make much sense: people are not often surprised to find that they sold more bonds for cash than they had expected because people do not usually quote a price at which they offer to sell whatever quantity of bonds people want to buy. By contrast, the Old Keynesian story does seem to me to make sense: people do often quote a price at which they offer to sell whatever quantity of newly-produced goods and services people want to buy."
Brad DeLong: The keynesian multiplier and the monetary hot potato
"From my perspective the Old Monetarist story doesn't make much sense: people are not often surprised to find that they sold more bonds for cash than they had expected because people do not usually quote a price at which they offer to sell whatever quantity of bonds people want to buy. By contrast, the Old Keynesian story does seem to me to make sense: people do often quote a price at which they offer to sell whatever quantity of newly-produced goods and services people want to buy."
jueves, 23 de agosto de 2012
lunes, 20 de agosto de 2012
sábado, 18 de agosto de 2012
viernes, 17 de agosto de 2012
jueves, 16 de agosto de 2012
miércoles, 15 de agosto de 2012
martes, 14 de agosto de 2012
lunes, 13 de agosto de 2012
Sobre la crisis de Grecia
Ryan Avent
"The details of this particular depression are obviously a bit different from those of the 1930s contraction. But the themes are the same. The Greek economy clearly suffers from all sorts of real problems—labour market rigidities, overregulation, corruption, etc—but such problems afflict lots of countries without sparking a massive economic implosion. No one has bombed Greece and blown up a fifth of its economic infrastructure. No one has erased the memories of a quarter of the Greek workforce, leaving people unable to speak or type or tend machinery. The Greek economy is imploding for no other reason than that the prices are wrong.
The prices are wrong. When the crisis hit demand fell. People stopped shipping money into Greece to buy its goods or invest in its properties or visit its tourist hot spots. Prices needed to adjust to keep resources employed. If Greece had retained its own currency, falling demand should have led it to weaken, bringing prices down economy-wide. Since it was stuck using the euro, nominal wages and prices had to fall, a slow process, especially in an economy with a highly regulated labour market. And so Greece fell into a deep recession. Capital outflow and recession led to an explosion in debt which shook market confidence. The resulting crisis generated two nasty developments—panic capital outflows and government austerity—which led demand to weaken further. Even if the Greek economy had been much more flexible, wages and prices would have struggled to chase demand downward and adjust sufficiently quickly. Collapsing output and employment were inevitable."
"The details of this particular depression are obviously a bit different from those of the 1930s contraction. But the themes are the same. The Greek economy clearly suffers from all sorts of real problems—labour market rigidities, overregulation, corruption, etc—but such problems afflict lots of countries without sparking a massive economic implosion. No one has bombed Greece and blown up a fifth of its economic infrastructure. No one has erased the memories of a quarter of the Greek workforce, leaving people unable to speak or type or tend machinery. The Greek economy is imploding for no other reason than that the prices are wrong.
The prices are wrong. When the crisis hit demand fell. People stopped shipping money into Greece to buy its goods or invest in its properties or visit its tourist hot spots. Prices needed to adjust to keep resources employed. If Greece had retained its own currency, falling demand should have led it to weaken, bringing prices down economy-wide. Since it was stuck using the euro, nominal wages and prices had to fall, a slow process, especially in an economy with a highly regulated labour market. And so Greece fell into a deep recession. Capital outflow and recession led to an explosion in debt which shook market confidence. The resulting crisis generated two nasty developments—panic capital outflows and government austerity—which led demand to weaken further. Even if the Greek economy had been much more flexible, wages and prices would have struggled to chase demand downward and adjust sufficiently quickly. Collapsing output and employment were inevitable."
domingo, 12 de agosto de 2012
viernes, 10 de agosto de 2012
miércoles, 8 de agosto de 2012
Tasa interbancaria y tasa de los bonos
How does the Fed Funds Rate affect Treasury yields?
"Treasury bills are more predictably influenced by the fed funds rate than notes and bonds because Treasury bills and the fed funds rate are competing investments in the money market. The money market is the market for high-quality, short-term debt instruments. Just as individuals put uninvested cash into money market mutual funds, where they can earn interest without putting principal at risk, institutional investors for the same purpose invest directly in the money markets by buying instruments like fed funds and Treasury bills.
As investments, fed funds and Treasury bills generally offer comparable yields. Note and bond yields are less closely tied to the fed funds rate because their longer maturities (from two to 30 years) mean more can happen during their lifetime. That gives them the potential to undergo big price changes. In general, the longer the maturity of a debt security, the greater the potential price changes."
Interest rates for beginners
"When the Federal Reserve changes the Federal funds rate, its effects ripple out through the economy, but with all sorts of lags and dampening effects. Broadly speaking, interest rates can differ from the Fed funds rate for two reasons: maturity (the amount of time you are lending money for) and credit risk (the risk that you won’t get paid back). We’ll talk first about U.S. Treasuries, because “by definition” they involve no credit risk.
The Treasury Department raises money by issuing bonds that range in maturity from a few days to 30 years. At the low end, there is virtually no risk of any sort, so the yield is purely a function of supply and demand; if a lot of people have money and nothing else to do with it, yields will be low. There was an auction today for 4-week Treasury bills, and the yield was exactly zero; people are lending money to the government for free.
With a longer maturity, however, there is risk, even when lending to the U.S. government. The main risk is inflation. Because all the payment stream of a bond is fixed in nominal terms, the higher inflation is over the maturity of the bond, the less it will be worth to you in real terms. What matters here is not the current rate of inflation, but investors’ expectations of what inflation will be over the maturity of the bond. If investors expect inflation to go up, they will demand higher yields to compensate; even if they expect inflation to remain steady, they will still demand a higher yield for a longer-maturity bond, because the longer maturity means there is more time in which inflation could increase. Paul Krugman. Y aca
"Treasury bills are more predictably influenced by the fed funds rate than notes and bonds because Treasury bills and the fed funds rate are competing investments in the money market. The money market is the market for high-quality, short-term debt instruments. Just as individuals put uninvested cash into money market mutual funds, where they can earn interest without putting principal at risk, institutional investors for the same purpose invest directly in the money markets by buying instruments like fed funds and Treasury bills.
As investments, fed funds and Treasury bills generally offer comparable yields. Note and bond yields are less closely tied to the fed funds rate because their longer maturities (from two to 30 years) mean more can happen during their lifetime. That gives them the potential to undergo big price changes. In general, the longer the maturity of a debt security, the greater the potential price changes."
Interest rates for beginners
"When the Federal Reserve changes the Federal funds rate, its effects ripple out through the economy, but with all sorts of lags and dampening effects. Broadly speaking, interest rates can differ from the Fed funds rate for two reasons: maturity (the amount of time you are lending money for) and credit risk (the risk that you won’t get paid back). We’ll talk first about U.S. Treasuries, because “by definition” they involve no credit risk.
The Treasury Department raises money by issuing bonds that range in maturity from a few days to 30 years. At the low end, there is virtually no risk of any sort, so the yield is purely a function of supply and demand; if a lot of people have money and nothing else to do with it, yields will be low. There was an auction today for 4-week Treasury bills, and the yield was exactly zero; people are lending money to the government for free.
With a longer maturity, however, there is risk, even when lending to the U.S. government. The main risk is inflation. Because all the payment stream of a bond is fixed in nominal terms, the higher inflation is over the maturity of the bond, the less it will be worth to you in real terms. What matters here is not the current rate of inflation, but investors’ expectations of what inflation will be over the maturity of the bond. If investors expect inflation to go up, they will demand higher yields to compensate; even if they expect inflation to remain steady, they will still demand a higher yield for a longer-maturity bond, because the longer maturity means there is more time in which inflation could increase. Paul Krugman. Y aca
Notas II
Ok, esta claro que las OMAs mueven el mercado de base monetaria. Y por consiguiente mueven el precio de ese mercado, el Fed Funds Rate. La pregunta es cual es la relacion de ese mercado con el mercado de bonos (de deuda) y con el precio de ese mercado, la tasa de interes de los bonos
Según lo describe la Fed de NY:
Según lo describe la Fed de NY:
- En el mercado de base monetaria, los bancos prestan sus reservas y piden prestadas reservas de otros bancos. El precio al que estos prestamos se llevan a cabo es la Fed Funds Rate. Listo, perfecto
- Ahora entra en escena el mercado de dinero. El 'money market' en el que se transa deuda menor a un año. Es decir se transan bonos de corto plazo que pagan interes y que son muy liquidos
Notas
Una OMA expansiva mete base monetaria y saca bonos de circulacion. Con tanta base monetaria disponible, los bancos se la prestan entre si a una tasa muy barata (esta es la Fed funds rate, que esta en 0%). La idea es que esto reduzca la tasa a la que los bancos le prestan a la gente
Al aumentar la compra de bonos esta aumentando la demanda por ellos (se puede decir que disminuye la oferta de bonos, sacandolos de circulacion?). Al aumentar la demanda, aumenta su precio es decir baja la tasa.
El objetivo de la estrategia es desincentivar la compra de bonos. Que la gente invierta en otras cosas.
Lo que esta pasando es que no se ha logrado desincentivar la compra de bonos. La gente sigue comprando bonos. Es decir la demanda esta aumentando. Si la demanda aumenta el precio aumenta, es decir baja la tasa (esta seria la tasa de los bonos del Tesoro; la que esta en 1,66% a 10 años)
No hay una contradiccion ahi? Si el problema es que hay una demanda muy alta de bonos, el problema no lo agrava el banco central elevando aun mas la demanda?
No, al aumentar mas la demanda esta elevando el precio con la esperanza de alcanzar el punto en el que se desincentive su compra.
LIQUIDITY TRAP: EL TRADICIONAL METODO DEL BANCO CENTRAL DE QUITAR BONOS ES METER BASE MONETARIA. CUANDO EL PRECIO DE LA BASE MONETARIA ES CERO, NO PUEDE QUITAR MAS BONOS. EL PRECIO DE LA BASE MONETARIA ES EL LIMITE DE LA COMPRA DE BONOS. CON OTROS METODOS PODRIA MAS. EL BANCO CENTRAL ESTA ATRAPADO POR SU PROPIO METODO
Por que? Para que el banco central pueda comprar bonos y dar a cambio base monetaria, los PRIMARY DEALERS (instituciones que compran bonos del gobierno) tendrían que estar dispuestos a tomar el otro lado de la transaccion, es decir vender sus bonos y tener mas base monetaria. Eso estan dispuestos a hacerlo mientras que prestar base monetaria les resulte rentable. Si el precio de la base monetaria es cero, ya no les resulta rentable y ya no venden mas sus bonos.
Relacionado
Al aumentar la compra de bonos esta aumentando la demanda por ellos (se puede decir que disminuye la oferta de bonos, sacandolos de circulacion?). Al aumentar la demanda, aumenta su precio es decir baja la tasa.
El objetivo de la estrategia es desincentivar la compra de bonos. Que la gente invierta en otras cosas.
Lo que esta pasando es que no se ha logrado desincentivar la compra de bonos. La gente sigue comprando bonos. Es decir la demanda esta aumentando. Si la demanda aumenta el precio aumenta, es decir baja la tasa (esta seria la tasa de los bonos del Tesoro; la que esta en 1,66% a 10 años)
No hay una contradiccion ahi? Si el problema es que hay una demanda muy alta de bonos, el problema no lo agrava el banco central elevando aun mas la demanda?
No, al aumentar mas la demanda esta elevando el precio con la esperanza de alcanzar el punto en el que se desincentive su compra.
LIQUIDITY TRAP: EL TRADICIONAL METODO DEL BANCO CENTRAL DE QUITAR BONOS ES METER BASE MONETARIA. CUANDO EL PRECIO DE LA BASE MONETARIA ES CERO, NO PUEDE QUITAR MAS BONOS. EL PRECIO DE LA BASE MONETARIA ES EL LIMITE DE LA COMPRA DE BONOS. CON OTROS METODOS PODRIA MAS. EL BANCO CENTRAL ESTA ATRAPADO POR SU PROPIO METODO
Por que? Para que el banco central pueda comprar bonos y dar a cambio base monetaria, los PRIMARY DEALERS (instituciones que compran bonos del gobierno) tendrían que estar dispuestos a tomar el otro lado de la transaccion, es decir vender sus bonos y tener mas base monetaria. Eso estan dispuestos a hacerlo mientras que prestar base monetaria les resulte rentable. Si el precio de la base monetaria es cero, ya no les resulta rentable y ya no venden mas sus bonos.
Relacionado
martes, 7 de agosto de 2012
The anniversary of the S&P downgrade – Have we learned anything?
Aca
"The USA has an institutional arrangement in which it is a currency issuer. That is, while the Treasury is an operational currency user (meaning it must always have funds in its account at the Fed before it can spend those funds) it is always able to harness the banks to procure funds. This is achieved through bond auctions in which the dealers are required to bid"
"The USA has an institutional arrangement in which it is a currency issuer. That is, while the Treasury is an operational currency user (meaning it must always have funds in its account at the Fed before it can spend those funds) it is always able to harness the banks to procure funds. This is achieved through bond auctions in which the dealers are required to bid"
lunes, 6 de agosto de 2012
The danger of repo
Felix Salmon
This is exactly wrong. Repos are a form of informationally-insensitive asset: they epitomize the paradoxical and ultimately destructive desire on the part of people with money to lend out money but to take no credit risk while doing so. Informationally-insensitive assets are a bad idea in general, for reasons which are probably familiar at this point to most readers of this blog: they breed complacency, tail risk, and deluded, magical thinking. But repos are a particularly bad species of the genus, because they are a direct replacement for old-fashioned unsecured credit.
Lending money in return for interest on that money is a form of investing: one entity, with money to spare, invests that money in a venture which can put it to good use and profit from it. If all goes according to plan, both win. The borrower might be poor but has ideas, and the ability to make money in the future; the investor makes such profits possible.
When you move from a credit-based system to a repo-based system, however, all that changes. At that point, future profitability isn’t enough to get you cash: instead, you need to be rich already, and you need to be able to hypothecate your existing assets to some lender. If we’re talking about the banking system, here, we’re talking about a world in which banks simply cease to trust each other at all, and the answer to all interbank credit questions is “no”. The only way for banks to lend to each other is to either go through some central counterparty, hub-and-spoke style, or else to retreat to the world of repo, where banking prowess counts for nothing and all that matters is collateral quality.
The implications of such a world are already being seen: Tett says that “collateral arbitrage” has now become a profit center at some banks. Far from trying to lend out money to creditworthy borrowers, banks are beginning to make money by gaming inconsistent repo rules. No good can come of this.
And in times of crisis, a reliance on repo markets makes all banks incredibly fragile, and vastly increases the risk to taxpayers should a bank fail. Once upon a time, banks had equity, they had debt, and then they had deposits. If a bank failed, the bank’s equity would be wiped out first, and then its debt. The depositors were senior, which meant there was relatively little chance that the FDIC would have to bail them out.
Now, however, bank debts are shrinking, replaced with repo operations. As a result, when a bank fails, the equity gets wiped out first — and then there’s no cushion any more before the depositors start losing money and need to be bailed out. The rest of the finance world is senior to depositors: they have repo collateral, which makes them secured creditors, and secured creditors are senior to unsecured creditors, even when the unsecured creditors are just mom-and-pop depositors.
The more that the world of finance relies upon repo, the less it relies upon relationships and trust and underwriting and all the other ties which bind. The financial sector can’t afford those ties to be severed: the cost of breaking them, in terms of foregone growth and profit, is far too great. But we seem to be doing exactly that.
Nick Rowe: Why does repo exist?
This is exactly wrong. Repos are a form of informationally-insensitive asset: they epitomize the paradoxical and ultimately destructive desire on the part of people with money to lend out money but to take no credit risk while doing so. Informationally-insensitive assets are a bad idea in general, for reasons which are probably familiar at this point to most readers of this blog: they breed complacency, tail risk, and deluded, magical thinking. But repos are a particularly bad species of the genus, because they are a direct replacement for old-fashioned unsecured credit.
Lending money in return for interest on that money is a form of investing: one entity, with money to spare, invests that money in a venture which can put it to good use and profit from it. If all goes according to plan, both win. The borrower might be poor but has ideas, and the ability to make money in the future; the investor makes such profits possible.
When you move from a credit-based system to a repo-based system, however, all that changes. At that point, future profitability isn’t enough to get you cash: instead, you need to be rich already, and you need to be able to hypothecate your existing assets to some lender. If we’re talking about the banking system, here, we’re talking about a world in which banks simply cease to trust each other at all, and the answer to all interbank credit questions is “no”. The only way for banks to lend to each other is to either go through some central counterparty, hub-and-spoke style, or else to retreat to the world of repo, where banking prowess counts for nothing and all that matters is collateral quality.
The implications of such a world are already being seen: Tett says that “collateral arbitrage” has now become a profit center at some banks. Far from trying to lend out money to creditworthy borrowers, banks are beginning to make money by gaming inconsistent repo rules. No good can come of this.
And in times of crisis, a reliance on repo markets makes all banks incredibly fragile, and vastly increases the risk to taxpayers should a bank fail. Once upon a time, banks had equity, they had debt, and then they had deposits. If a bank failed, the bank’s equity would be wiped out first, and then its debt. The depositors were senior, which meant there was relatively little chance that the FDIC would have to bail them out.
Now, however, bank debts are shrinking, replaced with repo operations. As a result, when a bank fails, the equity gets wiped out first — and then there’s no cushion any more before the depositors start losing money and need to be bailed out. The rest of the finance world is senior to depositors: they have repo collateral, which makes them secured creditors, and secured creditors are senior to unsecured creditors, even when the unsecured creditors are just mom-and-pop depositors.
The more that the world of finance relies upon repo, the less it relies upon relationships and trust and underwriting and all the other ties which bind. The financial sector can’t afford those ties to be severed: the cost of breaking them, in terms of foregone growth and profit, is far too great. But we seem to be doing exactly that.
Nick Rowe: Why does repo exist?
sábado, 4 de agosto de 2012
viernes, 3 de agosto de 2012
jueves, 2 de agosto de 2012
The epic failure of central banking
Aca
Their failure to act in the midst of the ongoing crisis amounts to a passive tightening of global monetary policy. This is because their inaction raises the global demand for safe assets while allowing existing ones to be destroyed. Since these safe assets effectively act as money, the central banks are worsening the excess money demand problem that underlies the global aggregate demand shortfall. This passive tightening has been going since mid-2008
Ryan Avent: The way forward
Their failure to act in the midst of the ongoing crisis amounts to a passive tightening of global monetary policy. This is because their inaction raises the global demand for safe assets while allowing existing ones to be destroyed. Since these safe assets effectively act as money, the central banks are worsening the excess money demand problem that underlies the global aggregate demand shortfall. This passive tightening has been going since mid-2008
Ryan Avent: The way forward
The evolution of treasury and muni bond yields
Aca
What’s depicted below is the 10 year US Treasury versus the 10 year muni bond index. As you can see, the yields have an extremely high correlation – muni bonds practically ARE treasury bonds. So why are yields surging in Italy, Spain, Greece and Portugal, but they’re remaining so tame in the muni market? Simple – the US government, which can always procure funds via taxes and bond sales therefore making solvency a non-issue, provides substantial federal aid to the states every year. While this doesn’t eliminate the solvency issue at the state level it certainly helps reduce it substantially. Europe has no such mechanism in place so what you basically have is a bunch of US states in an environment where they’re left to fend for themselves. They can’t print their own currency, they can’t devalue their own currency and they can certainly run out of Euros. The result is bond investors who are terrified about default and end up selling bonds which only exacerbates the budgeting process.
What’s depicted below is the 10 year US Treasury versus the 10 year muni bond index. As you can see, the yields have an extremely high correlation – muni bonds practically ARE treasury bonds. So why are yields surging in Italy, Spain, Greece and Portugal, but they’re remaining so tame in the muni market? Simple – the US government, which can always procure funds via taxes and bond sales therefore making solvency a non-issue, provides substantial federal aid to the states every year. While this doesn’t eliminate the solvency issue at the state level it certainly helps reduce it substantially. Europe has no such mechanism in place so what you basically have is a bunch of US states in an environment where they’re left to fend for themselves. They can’t print their own currency, they can’t devalue their own currency and they can certainly run out of Euros. The result is bond investors who are terrified about default and end up selling bonds which only exacerbates the budgeting process.
miércoles, 1 de agosto de 2012
Lachmann and Postkeynesianism on prices
Aca
"In Classical economics (from Smith to Mill), the equilibrium value of prices in the long run was essentially the cost of production. With the marginalist revolution, value was held to be subjective, and prices a consequence of the marginal utilities of market participants (Lachmann 1994: 165).
Yet, with the existence of “fixprices” in many markets, it is obvious that cost of production plus the profit markup must explain how prices are set in the real world.
That nobody can sell a product for which there is no subjective demand is obviously true, but after that the subjective theory of value has its limitations."
While economic “value” defined simply as the pleasure, utility or satisfaction we derive from commodities is subjective, it is a mistake to think that prices are therefore all subjective, or just determined by subjective utilities. One has to distinguish “price theory” from “value theory,” but curiously modern neoclassical economics has largely dispensed with “value theory.”
"In Classical economics (from Smith to Mill), the equilibrium value of prices in the long run was essentially the cost of production. With the marginalist revolution, value was held to be subjective, and prices a consequence of the marginal utilities of market participants (Lachmann 1994: 165).
Yet, with the existence of “fixprices” in many markets, it is obvious that cost of production plus the profit markup must explain how prices are set in the real world.
That nobody can sell a product for which there is no subjective demand is obviously true, but after that the subjective theory of value has its limitations."
While economic “value” defined simply as the pleasure, utility or satisfaction we derive from commodities is subjective, it is a mistake to think that prices are therefore all subjective, or just determined by subjective utilities. One has to distinguish “price theory” from “value theory,” but curiously modern neoclassical economics has largely dispensed with “value theory.”
lunes, 30 de julio de 2012
Mario Draghi shows the power of expectations
David Beckworth
"The response was euphoric - stock markets railed, risk premiums on the Eurozone periphery fell, and the Euro strengthened - and demonstrated that expectations matters.Without actually doing anything, the ECB was able to catalyze a shift in portfolios toward riskier assets that, if followed through, could kickstart a recovery. It is what Matt O'Brien calls the Jedi mind trick or Nick Rowe dubs the Chuck Norris approach to central banking. This power by central banks to manage expectations is often overlooked or dismissed by many observers. The markets' response to Draghi's speech should give them pause."
"The response was euphoric - stock markets railed, risk premiums on the Eurozone periphery fell, and the Euro strengthened - and demonstrated that expectations matters.Without actually doing anything, the ECB was able to catalyze a shift in portfolios toward riskier assets that, if followed through, could kickstart a recovery. It is what Matt O'Brien calls the Jedi mind trick or Nick Rowe dubs the Chuck Norris approach to central banking. This power by central banks to manage expectations is often overlooked or dismissed by many observers. The markets' response to Draghi's speech should give them pause."
domingo, 29 de julio de 2012
How far is the ECB really prepared to go to save the euro?
Aca
"It is particularly salient that Mr. Draghi highlights the fatal flaw of the euro zone noted by Professor Peter Garber some 14 years ago: As long as there was no perceived probability of euro exit by any euro nation, the established transfer system coupling private markets with European system of Central Bank support (Target 2, ELA, ECB repos) would function like any other monetary system in a single nation state. However, Garber recognized that if there arose the prospect of a euro exit and, therefore, a devaluation risk for holders of deposits in the banks domiciled in the country slated for exit (e.g. Greece or Spain), the European monetary system would be exposed to a bank run. Under the EU treaty capital mobility was guaranteed. Under the common currency deposit transfers from domestically domiciled banks in countries at risk of euro exit (e.g. Greece, Spain) to banks domiciled in other euro nation states (e.g. Germany, Netherlands) was costless. Faced with any non-negligible perceived risk of a euro exit and thereby a devaluation loss, rational market participants should move all their deposit funds from the banks domiciled in the country at risk of euro exit to banks domiciled in nations at the Eurozone’s unassailable core."
Tim Duy sobre el discurso de Draghi
Tim Duy sobre el discurso de Draghi
DeLong vs Cochrane sobre la posibilidad de inflación
Aca
DeLong apuesta con Noah Smith
Màs
"...Of that, it looks as though on net about 2/3 are purchases of U.S. government debt and government-guaranteed debt. Call it $350 billion/year. Current foreign holdings of U.S. government and government-guaranteed debt look to be about $6 trillion. $350 billion/$6 trillion means that foreigners are adding to their holdings of U.S. government and government guaranteed debt at a pace of about 5.8%/year. With world nominal GDP outside the United States growing at about 6%/year, that means that foreigners are… buying about as much U.S. Treasury, Agency, and other goverenment-guaranteed debt as they should in order to keep their portfolio shares constant.
It does not look as if it is the case that the US government is running out of its foreign-based debt capacity.
Could foreigners all of a sudden decided that there governments are not worse than the US government, decide to dump US government bonds and buy their own country bonds, send the dollar down, and have that falling dollar set off a upwards surge of import prices that then set off an inflationary spiral here at home? Yes. Is this a high probability scenario? I confess that I do not see how: imports are a relatively small fraction of total US spending, foreign governments are at least as feckless as our own and are subject to political risks that we are not, and nobody--literally nobody, not even the people Cochrane talks to directly--is willing to bet any money on Cochrane's favored scenario."
Un comentarista: "Note also that foreigners dropping US debt would cause high interest rates which would lower demand. Given the ratio of imports to GDP, this effect could dominate. And with the Federal Funds rate of around zero, the idea that the Fed could do nothing to fight inflation is really utterly totally crazy. Not to mention that inflation would be an excellent thing (better 5% than 2% and, I think, better 10% than 5% except for the fact that the Fed could and would respond)."
DeLong apuesta con Noah Smith
Màs
"...Of that, it looks as though on net about 2/3 are purchases of U.S. government debt and government-guaranteed debt. Call it $350 billion/year. Current foreign holdings of U.S. government and government-guaranteed debt look to be about $6 trillion. $350 billion/$6 trillion means that foreigners are adding to their holdings of U.S. government and government guaranteed debt at a pace of about 5.8%/year. With world nominal GDP outside the United States growing at about 6%/year, that means that foreigners are… buying about as much U.S. Treasury, Agency, and other goverenment-guaranteed debt as they should in order to keep their portfolio shares constant.
It does not look as if it is the case that the US government is running out of its foreign-based debt capacity.
Could foreigners all of a sudden decided that there governments are not worse than the US government, decide to dump US government bonds and buy their own country bonds, send the dollar down, and have that falling dollar set off a upwards surge of import prices that then set off an inflationary spiral here at home? Yes. Is this a high probability scenario? I confess that I do not see how: imports are a relatively small fraction of total US spending, foreign governments are at least as feckless as our own and are subject to political risks that we are not, and nobody--literally nobody, not even the people Cochrane talks to directly--is willing to bet any money on Cochrane's favored scenario."
Un comentarista: "Note also that foreigners dropping US debt would cause high interest rates which would lower demand. Given the ratio of imports to GDP, this effect could dominate. And with the Federal Funds rate of around zero, the idea that the Fed could do nothing to fight inflation is really utterly totally crazy. Not to mention that inflation would be an excellent thing (better 5% than 2% and, I think, better 10% than 5% except for the fact that the Fed could and would respond)."
viernes, 27 de julio de 2012
jueves, 26 de julio de 2012
miércoles, 25 de julio de 2012
martes, 24 de julio de 2012
Sobre las bajas tasas de interes nominales
Scott Sumner: The implosion of a policy regime
"Even if the Fed does something semi-bold on August 1st, it most likely won’t be enough to change the underlying dynamic. And the reason is pretty basic; the Fed simply doesn’t have a grip on what went wrong. They had a policy regime that targeted short-term interest rates as a way of targeting inflation. Both of those decisions were flawed, and now the regime has collapsed. Markets are saying that the Fed may never again be able to using its preferred interest rate targeting mechanism. Let me emphasize that I still believe interest rates are more likely than not to eventually rise above zero. But these low yields are consistent with a non-zero probability of the US essentially becoming Japan."
Daniel Kuehn
Paul Krugman. Cullen Roche
Bye buy zero lower bound on nominal interest rates?
We have entered the world of disaster economics
The message of TIPS: Extremely weak growth ahead
"Even if the Fed does something semi-bold on August 1st, it most likely won’t be enough to change the underlying dynamic. And the reason is pretty basic; the Fed simply doesn’t have a grip on what went wrong. They had a policy regime that targeted short-term interest rates as a way of targeting inflation. Both of those decisions were flawed, and now the regime has collapsed. Markets are saying that the Fed may never again be able to using its preferred interest rate targeting mechanism. Let me emphasize that I still believe interest rates are more likely than not to eventually rise above zero. But these low yields are consistent with a non-zero probability of the US essentially becoming Japan."
Daniel Kuehn
Paul Krugman. Cullen Roche
Bye buy zero lower bound on nominal interest rates?
We have entered the world of disaster economics
The message of TIPS: Extremely weak growth ahead
domingo, 22 de julio de 2012
Sobre el pago de intereses a las reservas
David Glasner
"I pointed out that whether monetary policy has been simulative depends on whether the demand to hold the monetary base or the size of the monetary base has been increasing faster. I should have pointed out explicitly that the payment of interest on reserves has guaranteed that the demand to hold reserves would increase by at least as much as the quantity of reserves increased, thereby eliminating any possibility of monetary stimulus from the increase in bank reserves."
Pushback on the 'interest on reserves debate'
Stephen Williamson comenta sobre esa política. Scott Sumner también
Algunas observaciones
Scott Sumner le comenta a Mark Thoma
Quantitative easing and bank lending
The reserve requirement confusion
La Fed de NY: Interest on excess reserves and cash “parked” at the Fed. Cullen Roche comenta
Scott Sumner está en desacuerdo: The fallacy of composition lies at the very heart of monetary economics
Viejo post de Nick Rowe: Fallacies of composition and decomposition: The supply of money and reserves
Karl Smith tambien critica a la Fed
Otro sobre las reservas bancarias
Macroresilience
Cullen Roche y Noah Smith
Matt Klein aclara confusión sobre las reservas de Robert Hall
"I pointed out that whether monetary policy has been simulative depends on whether the demand to hold the monetary base or the size of the monetary base has been increasing faster. I should have pointed out explicitly that the payment of interest on reserves has guaranteed that the demand to hold reserves would increase by at least as much as the quantity of reserves increased, thereby eliminating any possibility of monetary stimulus from the increase in bank reserves."
Pushback on the 'interest on reserves debate'
Stephen Williamson comenta sobre esa política. Scott Sumner también
Algunas observaciones
Scott Sumner le comenta a Mark Thoma
Quantitative easing and bank lending
The reserve requirement confusion
La Fed de NY: Interest on excess reserves and cash “parked” at the Fed. Cullen Roche comenta
Scott Sumner está en desacuerdo: The fallacy of composition lies at the very heart of monetary economics
Viejo post de Nick Rowe: Fallacies of composition and decomposition: The supply of money and reserves
Karl Smith tambien critica a la Fed
Otro sobre las reservas bancarias
Macroresilience
Cullen Roche y Noah Smith
Matt Klein aclara confusión sobre las reservas de Robert Hall
DeLong vs Steve Keen sobre la crisis
DeLong
"In the neo-Wicksellian framework that Krugman likes to use when the economy is at its zero nominal interest rate bound, the central immediate problem with the economy is that because private households want to deleverage--planned saving at full employment is high--and because private businesses do not want to leverage--planned investment at full employment is low--planned spending is less than expected income and the economy spirals downward."
"In the neo-Wicksellian framework that Krugman likes to use when the economy is at its zero nominal interest rate bound, the central immediate problem with the economy is that because private households want to deleverage--planned saving at full employment is high--and because private businesses do not want to leverage--planned investment at full employment is low--planned spending is less than expected income and the economy spirals downward."
viernes, 20 de julio de 2012
jueves, 19 de julio de 2012
miércoles, 18 de julio de 2012
The terminal disease affecting banking
Es que se estan acabando, dice el FT
There’s no doubt, for example, that banks have held the top spot in credit creation for decades, if not centuries. Yet, there’s equally little doubt that banks have spent most of the last quarter of a century branching out into ever more exotic services and roles.
So why has that been?
In order to answer that it’s first important to understand what traditionally drives bank profitability.
As Steve Randy Waldman at Interfluidity points out it’s not, contrary to popular belief, their ability to create credit. Indeed, as we have also argued, any reputable institution or individual has the ability to do that. No, in Waldman’s opinion the power of banks actually lies in their more unique ability “to issue liabilities that are widely accepted as near-perfect substitutes for whatever trades as money despite being highly levered.”
So it’s really all about guarantees, and more specifically faith in those guarantees. You give money to a bank on deposit because you trust that it will remain a money-like instrument even though it’s earning you some interest.
Indeed, you get a return without having to compromise the liquidity profile of your holding. You get something seemingly out of nothing.
The rise of shadow banking is thus closely connected to investors becoming ever more satisfied that non-banks can perform a similar role. That, combined with the fact that these shadow banks can also guarantee liquidity without sacrificing basic returns, of course suddenly makes them competitors with banks.
There’s no doubt, for example, that banks have held the top spot in credit creation for decades, if not centuries. Yet, there’s equally little doubt that banks have spent most of the last quarter of a century branching out into ever more exotic services and roles.
So why has that been?
In order to answer that it’s first important to understand what traditionally drives bank profitability.
As Steve Randy Waldman at Interfluidity points out it’s not, contrary to popular belief, their ability to create credit. Indeed, as we have also argued, any reputable institution or individual has the ability to do that. No, in Waldman’s opinion the power of banks actually lies in their more unique ability “to issue liabilities that are widely accepted as near-perfect substitutes for whatever trades as money despite being highly levered.”
So it’s really all about guarantees, and more specifically faith in those guarantees. You give money to a bank on deposit because you trust that it will remain a money-like instrument even though it’s earning you some interest.
Indeed, you get a return without having to compromise the liquidity profile of your holding. You get something seemingly out of nothing.
The rise of shadow banking is thus closely connected to investors becoming ever more satisfied that non-banks can perform a similar role. That, combined with the fact that these shadow banks can also guarantee liquidity without sacrificing basic returns, of course suddenly makes them competitors with banks.
martes, 17 de julio de 2012
lunes, 16 de julio de 2012
Monetary policy, money and inflation
Paper de la Fed de San Francisco
Textbook monetary theory holds that increasing the money supply leads to higher inflation. However, the Federal Reserve has tripled the monetary base since 2008 without inflation surging. With interest rates at historically low levels and the economy still struggling, the normal money multiplier process has broken down and inflation pressures remain subdued.
Textbook monetary theory holds that increasing the money supply leads to higher inflation. However, the Federal Reserve has tripled the monetary base since 2008 without inflation surging. With interest rates at historically low levels and the economy still struggling, the normal money multiplier process has broken down and inflation pressures remain subdued.
sábado, 14 de julio de 2012
viernes, 13 de julio de 2012
The Fisher-Keynes-Minsky theory of debt-deflation
Aca
"A liquidity trap is a circumstance in which the private sector is deleveraging in the wake of enduring negative animal spirits caused by the bursting of joint asset price and credit bubbles that leave private sector balance sheets severely damaged. In a liquidity trap the animal spirits of the private sector cannot be revived by a reduction in short-term interest rates because there is no demand for credit. This effectively means that conventional monetary policy does not work in a liquidity trap
Deleveraging can be rational for an individual household. It can be rational for an individual corporation. It can be rational for an individual country. However, in the aggregate it begets the paradox of thrift: what is rational at the microeconomic level is irrational at the community, or macroeconomic, level.
This is not to say that the private sector should not deleverage. It has to. It is a part of the economy’s healing process and a necessary first step toward a self-sustaining economic recovery.
However, deleveraging is a beast of a burden that capitalism cannot bear alone. At the macro level, deleveraging must be a managed process: for the private sector to deleverage without causing a depression, the public sector has to move in the opposite direction and re-lever by effectively viewing the balance sheets of the monetary and fiscal authorities as a consolidated whole."
"A liquidity trap is a circumstance in which the private sector is deleveraging in the wake of enduring negative animal spirits caused by the bursting of joint asset price and credit bubbles that leave private sector balance sheets severely damaged. In a liquidity trap the animal spirits of the private sector cannot be revived by a reduction in short-term interest rates because there is no demand for credit. This effectively means that conventional monetary policy does not work in a liquidity trap
Deleveraging can be rational for an individual household. It can be rational for an individual corporation. It can be rational for an individual country. However, in the aggregate it begets the paradox of thrift: what is rational at the microeconomic level is irrational at the community, or macroeconomic, level.
This is not to say that the private sector should not deleverage. It has to. It is a part of the economy’s healing process and a necessary first step toward a self-sustaining economic recovery.
However, deleveraging is a beast of a burden that capitalism cannot bear alone. At the macro level, deleveraging must be a managed process: for the private sector to deleverage without causing a depression, the public sector has to move in the opposite direction and re-lever by effectively viewing the balance sheets of the monetary and fiscal authorities as a consolidated whole."
miércoles, 11 de julio de 2012
El 'pecado original' de la Union Europea
Aca
"When the European Monetary Union was set up, member-states adopted what was essentially a foreign currency (the euro) but were left in charge of their own fiscal policy. Dimitri Papadimitriou and Randall Wray explain in a new Policy Note (“Euroland’s Original Sin“) why this basic structural defect was always bound to tear the eurozone apart. The solvency crises and the bank runs afflicting Spain, Greece, and Italy were entirely foreseeable (and as Papadimitriou and Wray point out, entirely foreseen). Unless something is done to remedy this design flaw, the EMU will continue to crumble."
"When the European Monetary Union was set up, member-states adopted what was essentially a foreign currency (the euro) but were left in charge of their own fiscal policy. Dimitri Papadimitriou and Randall Wray explain in a new Policy Note (“Euroland’s Original Sin“) why this basic structural defect was always bound to tear the eurozone apart. The solvency crises and the bank runs afflicting Spain, Greece, and Italy were entirely foreseeable (and as Papadimitriou and Wray point out, entirely foreseen). Unless something is done to remedy this design flaw, the EMU will continue to crumble."
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