tag:blogger.com,1999:blog-2499715909956774229.post3577123621445554507..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: FOMC Statement, August 8Stephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-2499715909956774229.post-62287311467697334702010-08-11T15:05:45.167-07:002010-08-11T15:05:45.167-07:00The process we are seeing now is:
Trade deficit i...The process we are seeing now is:<br /><br />Trade deficit increasing --> Unemployment increasing --> Lower wages -->Not any recovery in consumption expected --> less tax collection--> High indebtness of government, companies and families --> lower expectations of all the economic agents ---> less investment (public and private) ---->less industrial production ----> Trade deficit increasing<br /><br />At the end---> Recesion and deflation trap<br /><br />The same process have been hapenning from more than 15 years ago, but to avoid the recession, the economy was based in a long succession of bubbles (mergers, dotcom, raw mats, real state...) and in the cheap credit (due to low interest rates), meantime the industrial outsourcing were growing exponencially, all in a unsustainable way. <br /><br />But now all the speculative business and the cheap credit is gone (as the authorities and economist should have expected) and we need a REAL economy, based on manufacturing REAL products, not merely smoke<br /><br />Now, with the crisis, the trade deficit with emerging countries (mainly China) is widening because with the lower earnings of the families, the people trend to buy the cheapest products, looking for price, not quality, and that is the advantage of the chinese goods compare to US products (a lot of them made by chinese companies, more and more, not outsourced by western companies)<br /><br />To print more money to increase the exports sounds good, but the debt holders are the countries more interested in maintaning the soaring trade deficit of US (mainly China and also Japan)<br />And the liquidity and solvency of China is a good leverage to avoid the hardly needed "protectionist temptation"<br /><br />The next steps of the process is a reduction of the life standard and social protection for all the people in western countries (except the very rich, they will earn more, of course and also a huge strategic change in the economic power balance in favour of ChinaDavid Feriahttps://www.blogger.com/profile/13947940111249361057noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-27033871458516068142010-08-11T14:03:35.962-07:002010-08-11T14:03:35.962-07:00In a separate statement, the Fed announced a new p...In a separate statement, the Fed announced a new purchasing program:<br /><br />http://noir.bloomberg.com/apps/news?pid=20602007&sid=awGAVtw.ox0s<br />--------------------------<br />"The central bank said in a separate statement that it will announce a purchasing schedule today and that its buying will be concentrated “in the two- to 10-year sector” of the maturity spectrum, though it will also buy other maturities as well as Treasury Inflation Protected Securities."<br />--------------------------Davenoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-3116666939964538742010-08-11T05:23:25.471-07:002010-08-11T05:23:25.471-07:00I should have added that there is also a WP from t...I should have added that there is also a WP from the BoE on the same subject.MWnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-43625128014254485332010-08-11T02:58:55.715-07:002010-08-11T02:58:55.715-07:00"I don't think anyone, including those on..."I don't think anyone, including those on the FOMC, have any idea what the effects are of intervention in long-maturitity Treasuries"<br /><br />True, though there are a couple of papers (FRB NY and Boston) that attempt to quantify the effect of QE (or "credit easing" in Bernanke's parlance).MWnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-50827871343368930562010-08-10T22:27:56.178-07:002010-08-10T22:27:56.178-07:00Since when is FED concerned about p&l?
And wh...Since when is FED concerned about p&l?<br /><br />And why are you concerned about maturity profile of FED balance sheet so much more than with maturity profile of private sector balance sheet?Игры рынкаhttps://www.blogger.com/profile/12001273098690387194noreply@blogger.com