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The Fed doesn't have the authority. Treasury does, but that would be an example of fiscal policy, not monetary policy, and something that would require Congressional authorization that growth-opposing Republican are not about to provide.
The Fed determines whether the economy is meeting internal Fed targets or not. It is meanwhile the National Bureau of Economic Research -- not the Conference Board -- that officially decides if and when expansion has turned to recession and vice versa.
That's true, but some folks just don't care.
Stagflation is a combination of high inflation, high unemployment, and slow economic griowth. In the US, it was a child of some bad Nixon/Ford ideas for how to deal with the 1973-74 Arab oil embargo. Carter for his part didnt have great success with the inflation he inherited, but he did quite well with unemployment until the second Arab oil crisis came along. Reagan of course then triggered what at the time was the worst economic collapse since the Great Depression. Ten straight months of unemployment above 10% as compared to one such month during the Great Recession.
In other words, the world financial system was starved for liquidity, and acting in concert with the central policies of other nations, the Fed acted to provide some.
Quite true. Some were so obtuse as to claim that a collapse was what was needed -- that the whole system needed to fail so that it could be rebuilt. The right way, this time. LOL! They imagined "white knights" out there just waiting to ride in to the rescue. This how childish our friends the "casual observers" can be, particularly when prodded by the doofus propaganda of whackjob internet sites.
Ramblings:
*The most important Fed. target has been 2% general price inflation and has been for decades. That's according to Harvey Rosenblum.
*Ouch! QFT, on the NBER v. Conference Board thing............very big/bad brain freeze on my part.
*IMO it requires a great deal of mental gymnastics to significantly blame Reagan for the early '80s recession. It's a bit like my very conservative, libertarian laissez-faireists mostly, friends blaming FDR for the second recession of The Great Depression.
*Regarding liquidity starvation in 2006/7/8.......I remember Jim Cramer, the TV blow-hard investor guy, literally yelling about the effective money supply being way too low and this was a good while before The Lehman Moment. Closer to home, my wife is CIO of a large insurance company. In early 2007 her department applied for $25MM (might have been $30MM) to upgrade equipment etc. in a few offices back east. The bank said sure you have an LoC good for than amount we'll fund HALF in 16/20 WEEKS the balance 6-10 WEEKS LATER! They self funded instead.
Looking back that sort of thing should have forced The FOMC to take strong action well before the bust. Frankly, HR has told me Fed researchers, university types and private economists with access to the right data did know things were getting really weird as early as 2004/5 but they could not get The Treasury/Congress or President Bush to do much of anything until the bust was well underway. Obviously, pretty much no one understood what a disaster letting Lehman die would yield.
Also, my wife's LoC problem tells me the banks, this was/is one of TBTF banks, were skirting reserve ratios, not trusting the Overnight Funds Market, and likely aware the system was a ticking time bomb well in advance.
Additionally, I'd really like to know who precisely at AIG decided it would be a good idea to insure clients against MBS losses greater X% (30% rings a bell)...........more or less for free while setting aside virtually no reserves in the event of losses? To me those decisions remain some of the greatest private-side failures within all of the bust.
*The most important Fed. target has been 2% general price inflation and has been for decades. That's according to Harvey Rosenblum.
I'm sure he has both supporters and critics in that belief.
Quote:
Originally Posted by EDS_
*IMO it requires a great deal of mental gymnastics to significantly blame Reagan for the early '80s recession.
Reagan was hell-bent on wringing inflation out of the economy. But in 1980-81, the economy was still in the process of recovering from the 1979-80 oil price shock. Mega-tight money just shut the recovery process down completely and sent economic activity reeling.
Quote:
Originally Posted by EDS_
It's a bit like my very conservative, libertarian laissez-faireists mostly, friends blaming FDR for the second recession of The Great Depression.
The Mises people (DiLorenzo, Shlaes, etc.) are all nutcases, but the decline was indeed FDR's fault. He never should have listened to the balance-the-budget bozos. But FDR like his pal Morgenthau was of a classical training in economics. They had tried all these Keynesian-looking things out of desperation, but they were not converts. There was always an intent to return to the "old way" once the crisis was over. Despite what those whispering in Roosevelt's ear had to say about it at the time, the crisis wasn't over yet in 1937.
Quote:
Originally Posted by EDS_
*Regarding liquidity starvation in 2006/7/8.......I remember Jim Cramer, the TV blow-hard investor guy, literally yelling about the effective money supply being way too low and this was a good while before The Lehman Moment.
Lehman scared people who hadn't been paying attention. Otherwise, articles had begun appearing in trade and scholarly journals by late 2003 about the problems that abuse of credit markets by mortgage brokers were creating for the system once interest rates began to rise. Congress of course was in the hands of joy-riding Republicans, so they weren't going to squawk. The minority did grill Greenspan during his regular appearances on the Hill, but he never budged off the notion that his staff had their eyes on things and that the Fed would move as soon as any need to move became apparent. Of course, he and the rest of the gang were dyed-in-the-wool free-marketeers. Markets were wise enough to regulate themselves, you know. Nothing was ever done.
Quote:
Originally Posted by EDS_
Additionally, I'd really like to know who precisely at AIG decided it would be a good idea to insure clients against MBS losses greater X% (30% rings a bell)...........more or less for free while setting aside virtually no reserves in the event of losses? To me those decisions remain some of the greatest private-side failures within all of the bust.
The prime target there would be Joseph Cassano, head of AIG's small London-based Financial Products Division. If you remember Drexel-Burnham-Lambert, he was in on that as well. Of course, AIG was making money hand over fist in the good times, and let's face it, there is nothing inherently wrong with credit default swaps or the low fees they typically carry. But there is something wrong with loading hundreds of billions of dollars on one side of the market and no dollars on the other. It was the failure to hedge that killed the deal. Which is kind of ironic actually.
Stagflation is a combination of high inflation, high unemployment, and slow economic griowth. In the US, it was a child of some bad Nixon/Ford ideas for how to deal with the 1973-74 Arab oil embargo. Carter for his part didnt have great success with the inflation he inherited, but he did quite well with unemployment until the second Arab oil crisis came along. Reagan of course then triggered what at the time was the worst economic collapse since the Great Depression. Ten straight months of unemployment above 10% as compared to one such month during the Great Recession.
Unemployment isn't counted in as objective a manner as it was, back then. It's no longer a reliable indicator of how the economy is doing, especially considering the participation rate, which is appalling, to say the least.
The U-6 rate is most likely around 20%-25%, right now.
Part of the reason why inflation was so high in the 70's was because the Johnson and Nixon Administrations used the Fed as a political tool, they pressured the private central bank to keep interest rates low, so they could claim that the economy was healthy and growing. Inflation went up when the hangover from the late-60's and early-70's hit, plus Nixon, at the behest of the elites, closed the gold window, which didn't help the value of the dollar.
If they're really trying to stimulate the economy, all they have to do is send a check for $20,000 to every man woman and child in America. Most people would spend that money.
I don't understand why you people are saying that paying down debt wouldn't stimulate the economy. Take my situation: I have a $15,000 student loan at 6.8% interest, currently paying the minimum payment of $182/month. If the gov't cut me a check for $15,000, I'd pay off the loan. Then I'd have $182 more in my pocket each month to spend on other things, instead of paying the salaries of some bankers. Furthermore, the economy would see even more money injected into it over time, due to interest. If I keep paying off the loan at $182/month, it will take me 111 months and I'll pay out a total of $20,268. So the $15,000 check from the feds creates $20,268 in economic stimulus by paying down debt. Am I missing something in this analysis?
Unemployment isn't counted in as objective a manner as it was, back then. It's no longer a reliable indicator of how the economy is doing, especially considering the participation rate, which is appalling, to say the least.
LOL! The unemployment rate is calculated from responses to monthly surveys of currently some 60,000 households. These surveys have been conducted every month since 1940. They are widely regarded as being the best tools in the world. And as they have been for decades, the unemployed are defined as those who do not have a job but would like one, who are currently available to work, and who have actively looked for work at some point in the most recent four weeks.
Quote:
Originally Posted by HowardRoarke
The U-6 rate is most likely around 20%-25%, right now.
The U-6 rate -- a special alternative measure not of unemployment, but rather of labor under-utilization -- stood at 10.8% last month. I kind of doubt that it's more than doubled since then.
Quote:
Originally Posted by HowardRoarke
Part of the reason why inflation was so high in the 70's was because the Johnson and Nixon Administrations used the Fed as a political tool, they pressured the private central bank to keep interest rates low, so they could claim that the economy was healthy and growing.
The Fed is a US government agency. Everyone who works there is a federal employee. The 12 regional FRB's are federally chartered quasi-private agents of the Fed. Staff who work there are not federal employees.
The Fed's overall mission is to influence monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates. The Fed cooperates with -- rather than trying to contradict -- the policies of the President in seeking those objectives.
Quote:
Originally Posted by HowardRoarke
Inflation went up when the hangover from the late-60's and early-70's hit, plus Nixon, at the behest of the elites, closed the gold window, which didn't help the value of the dollar.
Again, an LOL! Bretton Woods was AS DEAD AS A DOORNAIL! It was a temporary payments system designed to support and assist in post-WWII economic recovery. It had done its job. As the economies of once war-ravaged nations strengthened, markets laughed and laughed at official attempts to defend and maintain such an artificial system. There was no option but to close the so-called "gold window", and nothing lost in finally doing so.
Inflation in the 1960's was meanwhile modest by most standards. Even with pressures from spending on an ill-advised and unnecessary war, it took an oil-price shock to push it as high as 6% in 1973, but then to 11% in 1974. Things had settled down soon enough, but a second oil-price shock struck in 1979 and sent inflation back into double digits again.
Quote:
Originally Posted by HowardRoarke
Interest rates had to be jacked up, in order to bring inflation under control.
Well, that's certainly what the ever-confused Gipper was bedazzled into believing. Unfortunately, the leech-doctors were well behind the curve in this case, and their medicine turned out to be far more toxic than the disease they were trying to cure.
If they're really trying to stimulate the economy, all they have to do is send a check for $20,000 to every man woman and child in America. Most people would spend that money.
So that would be well more than $6 trillion shot into the economy all at once. Do you see any potential problems in that?
I don't understand why you people are saying that paying down debt wouldn't stimulate the economy.
It's all relative. GDP is equal to the supply of money times its velocity. Spending money increases velocity. These spending turnovers are in fact the measure of velocity. Paying off debt detours cash into the financial system where it may sit for quite some time before being sent back to where it came from. This decreases velocity from what it might otherwise have been, and thus retards GDP growth rather than contributing to it. Put briefly, money moves faster out on the interstate than it does while parked at some rest area.
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