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Ask and Listen
The head of the Minneapolis Fed, Narayana Kocherlakota gave a presentation
in Marseilles, France on Friday. This was another attempt at convincing
the public that the Fed can fix anything provided they are left to their
own devices and have unlimited capacity to print money. The
presentation was a “No Sale” for me.
The deep thinkers in Minneapolis have come up with a new formula. Bubbly Equilibria? What does that mean?
I suppose that someone has to create such drivel. The formulas were
based on an Apples and Bananas economic model. Unfortunately the real
world is a bit more complex.
The bottom line from Mr. K is that bubbles of any kind don’t create a threat to employment provided that the Fed provides the “appropriate”
level of monetary stimulus. He does point out the limits of monetary
policy due to the limitations of zero interest rates. So really this is
just a defense of QE. His words:
“The bubble collapse has no impact on unemployment or output, given sufficiently accommodative monetary policy,”
This suggests that the Fed can "fix" all bubbles. What Mr. K does not
seem to get is that the Fed is the one that causes bubbles. They do it
with accommodative monetary policy. We are seeing this in ink every day.
Look at the S&P, look at the CRB and look at the two-year note. They are all at bubble levels today. It’s cheap money and loose monetary policy that did it. The current bubbles formed by the Fed will pop. And when (not if) they do, guys like Kocherlakota will respond with: “We need more stimulus!!”
We do need some folks at the Fed who are purely academic economists. But they should not be pulling the strings on policy. We need pragmatists. Ones that can look beyond the next six months and say, “We should follow policies that promote long –term stability”.
The current policies that create bubbles, and then fight them when they
burst with more monetary stimulus, are old school. We need some new
leadership. That leadership should not come from academia.
Want some evidence of that? (Reuters)
In one of the paper's more surprising claims, Kocherlakota suggested that extending unemployment benefits
-- sometimes seen as adding to the jobless rate because it can
discourage those receiving benefits from actively seeking jobs -- actually reduces it.
Mr. K. has to get out of ivory tower and talk to the people.
He may be able to argue that extending unemployment benefits is
countercyclical. But if he bothered to ask around and see what is
happening he would understand that extending unemployment just creates
more unemployed. I’d be happy to introduce him to a few folks that maxed
out unemployment because it was much easier than working. But those people found work as soon as the checks stopped.
I suspect he would hear as much back in Minneapolis (if he bothered to ask). He would also hear that the folks in his district are just sick and tired of bubbles and the Fed that keeps causing them.
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"Keynes was a genius"
Keynes told governments what they wanted to hear.
Keynes told governments that they could have a rubber fiat currency and that it would allow for economic expansion forever, and in addition that rubber fiat could change the boom/bust cycle of capitalism.
If you believe that then you are definitely part of the problem. Look around at the economic devastation that litters all landscapes...this disaster is what Keynesian economics has brought us.
Rubber fiat is a total failure! Fiat printed at will without basis in excess labor is a failure! The Fed is a monstrosity that you promote because you have no vision of a world without privilaged banksters! And, you are a failure because you won't accept the facts in front of your eyes!
Your posting privilages on this site should be eliminated and you should join the chorus of clowns seen daily on main stream media outlets.
I really think Robert Skidelsky's biography of Keynes should be required reading for everyone:
John Maynard Keynes: 1883-1946: Economist, Philosopher, Statesman
After reading this book, you will understand and appreciate Keynes' true genius and his enormous influence in shaping 20th century economic and social policy.
"I'm not a "cripple" and don't see why you have to resort to making fun of disabled people to get your dumb points across."
Where in this did I make "fun" of cripples?
"You get nothing from me...I realize I will come out on the wrong end of arguing with a cripple but you're a big boy right?"
Tell me right fucking now Leo!
Right NOW!!!
"Tell me right fucking now Leo!
Right NOW!!!"
nmewn,
Take a deep breath and read your comments carefully. Apart from insulting me, calling me a "cripple," you're insulting others who are a lot worse off than me in terms of their disabilities by using such words. Somewhere in the comments below you asked me if I ever went hungry. No, and I count myself lucky to have food on the table and a roof over my head. But I have struggled to walk a few blocks and I understand the plight of the disabled in terms of dealing with prejudices. Using words like "cripple" just shows me that you're an arrogant, closed-minded jerk who labels people in terms of their disabilities. You can insult my market views all you want, but don't insult me and others for having an illness that affects our mobility. THINK before you hit the save button in your comments. Read them over at least once and ask yourself, is this really necessary to get my points across?
Leo you just don't get it. You are the problem. We're living smack in the middle of a 98 year Ponzi scheme, pyramid scheme, a con, a scam. You stoke the fire of this purely evil system every time you spew your subsidized solar stock garbage, BTFD bullshit. Can't you see a lot of posters on this site don't hate you but hate what you stand for. You stand for everything we despise: the International Banking Cartel, the FED, crooked politicians and corrupt government and the scumbag lying corporations that own them. When will you grow a spine?
piceridu wrote: "Can't you see a lot of posters on this site don't hate you but hate what you stand for. You stand for everything we despise: the International Banking Cartel, the FED, crooked politicians and corrupt government and the scumbag lying corporations that own them. When will you grow a spine?"
I don't take comments on ZH personally except when they cross the line like akak, nmewn and some others have. I have a spine which is why I call it like I see it. People out there getting terrible advice on investments. It's a very difficult market to navigate through because of the macro environment. But unlike some of you, I don't take an ideological stance on the Fed, the gvt, etc.. I'm analyzing the markets and focusing on liquidity, pension flows and other flows from sovereign wealth funds and hedge funds. I don't let ideology cloud my analysis. The market is ruthless; it doesn't care about ideology. Many of you see this as a moral issue. Leave morality out of this. If you let morality and your emotions cloud your judgment, you'll never invest a dime anywhere, never take risk, and never lose or make money. If ZH was all about one side of the trade, it would be another prudentbear site.
Agreed, time for a reality check for those who thought they were worth so much. Those pussies who thought it was too hard to study a real field like Engineering.
Bullshit.
If you are graduating with an engineering degree you have few options for employment.
The military is the fallback-- see it all the time.
The employment situation is far worse for young than old and established "pussies."
If you live in the wrong area.. you might be well served to move. I keep telling everyone that things are going really well down south. There won't be a live aid tour for you people living in economic desserts and paying the 99'rs to wait is the wrong plan. We would be wary of new arrival's work ethics if they stayed on the dole so long.. Just telling it how it is down south. And if you sit on your ass for 2 years we consider you a "pussy" down here. It is simply not acceptable and inconprehensible down here.
@Bruce who wrote to me:
"You seem to have some notion that Americans have a right to a high paying job with benefits. And if the don't have that they should get paid for not working.
You are wrong Leo. America is not what it once was. We have to compete on a global scale now. We brought that on ourselves. Now way have to pay a price. There is no free lunch.
You and a bunch of others keep telling people that all we have to do is run the printing press for a few more months and everything will back to "normal". Sorry to tell you, that is the last thing that is going to happen."
My response: Bruce, where did this come from? I'm a 39 year old self-employed man with progressive MS who has to HUSTLE to find contracts and make money. If you think the unemployment rate is bad for regular folks, look at how insanely high it is for people with disabilities (ten times higher!). I lost a great job I loved with benefits at a Crown corporation because I opened my mouth and warned senior managers that the credit crisis was going to hit our portfolio hard. I think other factors (like my illness) may have also worked against me (but good luck proving this). I know firsthand there are NO GUARANTEES in life so please stop telling me about "cushy jobs with high salaries and benefits". The shit I've experienced in the last five years I wouldn't wish on my worst enemy!
I agree that people will have to ratchet down their expectations but there is a limit to how low one can go. As for the Fed, they'll toe the line with the power elite and keep pumping billions into the financial system. Get used to it. Don't fight the Fed. If you do, you're going to get slaughtered shorting the stock market. There will be pullbacks, but keep buying these dips. Bubblenomics is here to stay.
"...Bubblenomics is here to stay..." for a while...
I agree with the part from Leo K, where we all have to hustle. The hustle is a part of life. Those with a sense of entitlement always have a rough go of it.
But how long can the Fed bubblemachine continue? Longer than we think, but as soon as we become complacent and begin to think it's immortal, it will collapse. That's the nasty trickiness of such things.
Leo says:
Bubblenomics is here to stay.
You're wrong Leo. At so many levels. The bubblenomics that you are in love with ruin millions of peoples lives. It could well take out most of your generation. You don't see that?
You have a serious illness. It could shorten your life. So you, more than most, can understand the difference between short-term and long.
Bubblenomics is short-term garbage.
I want you, my kids and our society/economy to be healthy and succesful for a long time. What we are doing is a short term high. We won't live long if we keep this up.
As always, I wish you well.
b
The millions are not located in the West and certainly not in the US.
The millions of ruined lifes are all those of people who live in countries coerced to accept the USD and supporting the US way of life. Victimhood is high and a natural habit in the US. On such topics though, and on the internet, decency commands to be accurate and honest.
Bruce,
Yes, I have a serious illness but it won't shorten my life! Most people with MS go on to live fairly normal, productive lives with normal lifespans (and by most, I mean 70% before drugs were introduced). I consider myself lucky because my disease has progressed extremely slowly and I'm still able to walk, work hard and enjoy life since being first diagnosed 14 years ago. As for stress, I avoid bullshit stress but I love the stress of markets -- simply love it! I don't love Bubblenomics, but have learned to accept it. You trade currencies, I trade stocks, others trade bonds. But whatever you trade, you have to adapt and respect liquidity flows.
As for the long-term, Keynes was right, we're all dead. Nobody really knows how all this is going to play out. Doomsayers see the sky falling, optimists see everything rosy. I too hope for a better future full of peace, prosperity and the eradication of many diseases, including cancer, heart disease and neurological diseases.
cheers,
Leo
trading for a living is more detrimental to ones life than any other illness
Leo, first hand, eye witness, experience - I hope you can look into this:
http://www.ncbi.nlm.nih.gov/pubmed/12182963
I was shocked to see the improvement once this regiment was in place.
Actually, only proximity jobs, servitude jobs, hard to outsource because the demand must be satisfied on location.
The difference is then not in earnings but whether or not it is possible to outsource the job.
An addition on the immigrants finding jobs easily or so. Most of them were trained in their own society, with the burden of training being supported by their own society.
Retraining comes at a cost, a cost the US saves by engaging in the US style economics, based on suppressing consumption overseas so that resources, goods, wealth can be exported to the US and consume in the US.
As people can not consume at home, well, they move to the places where consumption is possible.
Still, it remains that retraining for a US citizen will come at a cost, a cost that should be covered by the predicted income of the activity. Added to that, some US citizens might not be finished with soaking the cost of their previous training, that adds up to the requirements put on their future earnings.
Clearly, as the US has a lifelong history in stealing, it becomes hard for US citizens to compute that foreigners come to the US with a training free of charges.
Job training is an absolute joke. Milton Friedman once said: "The best job training is a job."
"electrician, plumber, carpenter, roofer, mason, Dr, nurse"
Doctor or nurse, maybe. But I know many guys in the building trades that have little work or no work. I do, however, see a fair number of Mexican illegals working in construction, usually on state jobs. No one ever checks out the workers on the state and municipal jobs.
I doubt if either Bruce or Leo has a firm grasp of just how bad things are nationally in the construction sector, especially in Florida, California, Arizona, Nevada, Georgia, Michigan...
This from Leo: " people will have to ratchet down their expectations but there is a limit to how low one can go"
How low people will have to lower their expectations is a function of available goods for consumption, not of how much money the government can print or borrow. Issuing fiat paper or pumping out credit does not increase the economy. It just boosts (and in the process devalues) the existing money supply.
It is better for people to actually produce something at a relatively low wage, than to give them money to produce nothing.
Wake up, Leo. There's no such thing as a free lunch.
Wake up, Bruce. We don't need no stinkin Fed.
Low is determined by the general environment. US citizens can not go lower than what their general environment allows.