tag:blogger.com,1999:blog-2499715909956774229.post8360056890694874185..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: The Zero Lower Bound and Monetary PolicyStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-2499715909956774229.post-62174622601853722212017-05-20T07:18:34.683-07:002017-05-20T07:18:34.683-07:00The money stock can never be managed by any attemp...The money stock can never be managed by any attempt to control the cost of credit. Interest is the price of loan-funds (free market clearing rates). The price of money (the Fed's bailiwick) is the reciprocal of the price level. E.g., savings flowing through the non-banks increases the supply of loan-funds, not the supply of money (the opposite process of remunerating IBDDs). The 1966 S&L credit crunch is the economic prologue and paradigm.<br /><br />Instead of couching the “desk’s” instructions in terms of reserves available for private non-bank deposits (RPDs), as Paul Meek described in “Open Market Operations” in 1972, FOMC policy was bifurcated, and this subsequently emasculated the Fed’s “open market power”, ”, viz., the Central Bank’s sovereign right to promulgate the creation of new money and credit: at once and ex-nihilo.<br /><br />And monetary policy is impossible without the cooperation of the U.S. Treasury. The Fed requires “grist for its mill” as if the Great Depression didn’t teach anyone, including BuB, anything. There was a blatant lack of coordination between the Federal Reserve and the Treasury Dept. (e.g., necessitating the Treasury Supplementary Financing Program -SFP), etc. <br /><br />And the perverse and counter-cyclical increase in bank capital adequacy accounts destroyed over a trillion dollars of new money creation. <br />Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-57131818383382535342017-04-16T09:23:16.909-07:002017-04-16T09:23:16.909-07:00The conclusion comes from simulations of the FRB/U...The conclusion comes from simulations of the FRB/US model. If you know how FRB/US works (it's basically an expanded IS/LM/Phillips curve large-scale macroeconometric model), then their results are not at all surprising. In that model, long-run inflation expectations are exogenous, so a binding zero lower bound constraint implies the real rate is too high, output is too low, and via the Phillips curve, inflation is too low. But, in all the models that macroeconomists actually work with, if the zero lower bound constrains policy, this means the nominal interest rate is on average too high, and through the Fisher effect, inflation must be too high. Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-51120436493174628012017-04-15T17:34:34.018-07:002017-04-15T17:34:34.018-07:00"So, "according to the Fisher equation,&..."So, "according to the Fisher equation," as they say, inflation will be higher, on average, than 2%, not lower."LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-17543023282569557442017-04-14T06:36:22.132-07:002017-04-14T06:36:22.132-07:00Expand the quote so that I can locate it and answe...Expand the quote so that I can locate it and answer your question.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-71949469660579636692017-04-13T20:57:27.860-07:002017-04-13T20:57:27.860-07:00"...inflation will be higher...", what i..."...inflation will be higher...", what is your point here? Is it a critiqueof their policy recommendation or model maybe? I lost the plot...LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.com