tag:blogger.com,1999:blog-2499715909956774229.post4722228568884843166..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: QE2 ComplaintsStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-2499715909956774229.post-69322720931544928872010-11-17T06:07:13.813-08:002010-11-17T06:07:13.813-08:00On the Bank of Sweden: Interesting. It's possi...On the Bank of Sweden: Interesting. It's possible that the law does not permit this in the US. Also, the law does not permit paying interest on the reserve accounts of GSEs. Could you charge them negative interest though? Or could you charge the banks negative interest but be stuck in a situation where the GSEs do better at zero?Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-73191981861850167972010-11-16T18:36:31.519-08:002010-11-16T18:36:31.519-08:00Steve,
My take is that part of the job descriptio...Steve,<br /><br />My take is that part of the job description of Treasury Sec is to "promote a strong dollar policy," whatever that means, and whether or not it makes any sense. Except of course for John Snow, who described t-bills (in the social security trust fund) as "worthless iou's." So Geithner has a constraint that doesn't apply in normal-land.<br /><br />Re taxing reserves, see Sweden, Bank of: http://acrossthecurve.com/?p=8285 <br /><br />PSpsummershttps://www.blogger.com/profile/16146930482281058979noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-9428232461095126952010-11-16T18:10:44.657-08:002010-11-16T18:10:44.657-08:00Pete,
I didn't explain that, did I? I don'...Pete,<br /><br />I didn't explain that, did I? I don't think that the consequences of an exchange rate depreciation are that important. But obviously some people in the world (and some policy makers, including Tim Geithner) think they are. Since QE2 likely leads to an exchange rate depreciation, the Fed should have thought about how to sell that to the world. Now, maybe they did, and maybe Janet Yellen is part of the marketing, but it seems like the international reaction came as a surprise.<br /><br />Anonymous: Yes, the Fed could reduce the interest rate on reserves to zero, but likely that would have little effect. Bernanke is on record as not wanting to do that, for reasons that made no sense to me. I haven't heard anyone suggest taxing reserves. Maybe you have an idea there.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-72650050457206660492010-11-16T17:42:10.382-08:002010-11-16T17:42:10.382-08:00To generate a higher price level, the quantity of ...To generate a higher price level, the quantity of money supplied must exceed the quantity of money demanded. Couldn't we discourage banks from holding such large quantities of excess reserves by lowering the interest rate paid on reserves (maybe making it negative by taxing them)?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-59348664291954099462010-11-16T17:09:03.068-08:002010-11-16T17:09:03.068-08:00Steve,
"If the FOMC was not thinking about t...Steve,<br /><br />"If the FOMC was not thinking about the international repercussions of QE2, it should have been."<br /><br />Why???<br /><br />Sure, QE2 will lead (other things equal) to a dollar depreciation just like lowering the fed funds rate would. So what? <br /><br />If the FOMC decides -- based on a Taylor rule, dual mandate, inflation target or whatever -- that expansionary policy is called for, then that's what they'll do. The goal is inflation at target/full employment/price stability/whatever. What happens to the exchange rate will happen, or not, but is not a goal of policy. Are you arguing for including the exchange rate in a version of the Taylor rule?<br /><br />BTW, I don't remember where I read this, but re Taylor's opposition to current Fed policy, a useful paraphrase is "the Taylor rule means whatever the hell John Taylor says it means."<br /><br />PSpsummershttps://www.blogger.com/profile/16146930482281058979noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-69382158489965035352010-11-16T14:12:19.593-08:002010-11-16T14:12:19.593-08:00Hi Steve,
Nice post.
JT talks about this a bit in...Hi Steve,<br />Nice post. <br />JT talks about this a bit in his blog (Economics one). One of the posts is titled "The Taylor Rule Does Not Say Minus Six Percent"Conte6noreply@blogger.com