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rom year ago as opposed to the percent change at annual rate or the 6 month annualized percent change yeah the current vintage is dated 2016 06 29 the most recent previous vintage is dated 2016 05 31 the most recent value of this earlier vintage for april 2016 is 1 84 same as the reading in the footnote graph 1 seeing if i have the right data yup to be annoyingly fastidious the percent change at annual rate series shows the value 2 48 for april 2016 in the may vintage and the 6 month annualized shows the value 1 91 for april in the may vintage the percent change from year ago series fred s pcetrim12m159sfrbdal is definitely the one they used for the new characterization pdf so here in red is the inflation forecast 2 0 percent annual from july 2016 to the end of 2018 graph 2 the inflation rate blue and the inflation forecast red oh i want to say it looks like the blue line is going to crash thru the red line some time in mid 2017 about a year from now before even the mid point of the forecast period but who knows posted by the arthurian at 4 00 am 0 comments tuesday july 5 2016 if if and if at reddit st louis fed president jim bullard outlines new characterization of the outlook for the u s economy which criticizes forecasting more than 2 5 years into the future at the st louis fed the st louis fed s new characterization of the outlook for the u s economy by james bullard cletus coughlin bill dupor riccardo dicecio kevin kliesen michael owyang mike mccracken chris waller dave wheelock and steve williamson from the blurb president james bullard and his co authors explain the st louis fed s new characterization of the u s macroeconomic and monetary policy outlook which more explicitly takes into account uncertainty about possible medium and longer run outcomes uncertainty the new approach is based on the idea that the economy may visit a set of possible regimes instead of converging to a single long run steady state uncertainty about the future specifically perhaps converging to a single long run steady state refers to things like i don t have an example from the st louis fed but cbo uses potential output to set the level of real gdp in its medium term 10 year projections in doing so cbo assumes that any gap between actual gdp and potential gdp that remains at the end of the short term two year forecast will close during the following eight years the single long run steady state being the path of rgdp ten years out bullard says no more of this bully for you bullard as such the new approach does not include projections for long run values for u s macroeconomic variables or for the policy rate see less certainty oh heck i really like this here s the whole blurb the pdf is the st louis fed s new characterization of the outlook for the u s economy nine pages from the pdf an older narrative that the bank has been using since the financial crisis ended has now likely outlived its usefulness and so it is being replaced by a new narrative the hallmark of the new narrative is to think of medium and longer term macroeconomic outcomes in terms of regimes the concept of a single long run steady state to which the economy is converging is abandoned and is replaced by a set of possible regimes that the economy may visit regimes are generally viewed as persistent and optimal monetary policy is viewed as regime dependent switches between regimes are viewed as not forecastable i just really like this it is an admission they know less than they thought under the heading why now in the pdf it is a good time to consider a regime based conception of medium and longer term macroeconomic outcomes key macroeconomic variables including real output growth the unemployment rate and inflation appear to be at or near values that are likely to persist over the forecast horizon any further cyclical adjustment going forward is likely to be relatively minor we therefore think of the current values for real output growth the unemployment rate and inflation as being close to the mean outcome of the current regime of course the situation can and will change in the future but exactly how is difficult to predict therefore the best that we can do today is to forecast that the current regime will persist and set policy appropriately for this regime now is the time they say because inflation unemployment and real growth are at or near values that are likely to persist for the next two and a half years this is interesting to me because they re not predicting recession within the next 30 months and also because they and i disagree on the persistence of those current values i expect growth to become vigorous within that time frame and unemployment to fall further with inflation pressures reduced by the fall in the debt per dollar ratio since 2008 i ve predicted vigor here and considered comparable vigors here the part about the best that we can do is straight out of keynes in practice we have tacitly agreed as a rule to fall back on what is in truth a convention the essence of this convention though it does not of course work out quite so simply lies in assuming that the existing state of affairs will continue indefinitely except in so far as we have specific reasons to expect a change continuing a thought in the why now section of the pdf if there is a switch to a new regime in the future then that will likely affect all variables including the policy rate but such a switch is not forecastable it s not my area but this sounds to me very much like the uncertainty and ergodicity of which syll writes so often notes on productivity we do not think of the current regime as pessimistic output grows at the trend pace of two percent but the unemployment rate remains quite low and inflation remains at two percent in addition as we will describe below output growth could improve if productivity growth improves the new narrative views medium and longer term macroeconomic outcomes in terms of a set of possible regimes that the economy may visit instead of a single unique steady state by doing this we are backing off the idea that we have dogmatic certainty about where the u s economy is headed in the medium and longer run we are trying to replace that certainty with a manageable expression of the uncertainty surrounding medium and longer run outcomes the productivity growth rate has been low on average at least since 2011 we think of this as a low productivity growth regime we know from past observation of the u s economy that productivity could switch to a higher growth regime if such a switch occurred it might have important effects on many variables but especially on output growth which would be higher if productivity growth improves if such a switch occurs i m thinking they have no story about what drives productivity i have a story about what drives productivity other loose ends we have described a situation in which phillips curve effects on inflation are negligible low unemployment and generally strong labor markets despite being in place throughout the forecast horizon do not put upward pressure on inflation in the forecast we have described it could be that meaningful phillips curve effects return and drive inflation higher even though nothing else about the situation as we describe it has changed this is one risk first we have no reason based on current data to forecast a recession and so we adopt a no recession baseline scenario if low productivity magically switches to high productivity if meaningful phillips curve effects magically return if we are surprised by a recession posted by the arthurian at 4 00 am 1 comments monday july 4 2016 something old something new something borrowed something blue sorry i couldn t resist that title the oldest and newest vintages of data for the series household debt service payments as a percent of disposable personal income at alfred graph 1 what i expected maybe the data would go back some years before 1980 and i could use it to extend the current series back to an older start date what i got everything starts in 1980 so it doesn t do me any good plus the two datasets don t match up at all besides that the difference varies graph 2 the old series runs from more than 122 5 of the new series down to about 111 then quickly up and down i wonder what accounts for the difference in how much income is used for debt payments a new database for debt service ratios by mathias drehmann anamaria illes mikael juselius and marjorie santos 13 september 2015 the authors discuss the methodology of developing dsr data series amortisation data are generally not available and hence present the main difficulty in deriving aggregate dsrs it is possible to construct meaningful aggregate dsrs with a relatively sparse set of aggregate data potential mistakes mainly lead to a shift in the level of estimated dsrs but will not affect their dynamics over time potential mistakes mainly lead to a shift in the level of estimated dsrs but do not affect their dynamics over time to me this means the numbers might all be high or might all be low but the patterns of the high data and the low data should be quite similar i think we see this in the graph and yet as the second graph shows the patterns are not as similar as one might hope posted by the arthurian at 4 00 am 1 comments sunday july 3 2016 debt service i was never much of a reader but i did read a book by john barth one time back in the days when i read things other than econ giles goat boy it was called the thing i remember is that barth used the word service as you might use the word rogering at fred i search for debt service and select household debt service payments as a percent of disposable personal income tdsp debt service payments dsp as a percent of disposable personal income dpi the calculation for that is tdsp 100 dsp dpi for some reason fred doesn t give dsp in billions or if they do i can t find it to get dsp in billions i have to convert back from percent of dpi using dsp dpi tdsp 100 thus graph 1 household debt service payments in billions of dollars i want to check this debt service payments include both interest and principal fred provides a data series called monetary interest paid households this should be the interest portion of household debt service payments together on a graph monetary interest paid should be less than debt service payments in billions it is graph 2 household debt service blue and monetary interest paid red monetary interest paid is consistently lower than debt service in billions plus i see a satisfying similarity between the two this graph gives me confidence in both my calculation and the monetary interest series i wonder how the red line compares to the blue when i take the ratio here is interest payments as a percent of debt service graph 3 household interest paid as a percent of household debt service payments going down since 1983 the interest portion falls from near 70 of debt service in the early 1980s to less than 50 at present so we know the repayment of principal portion increased from near 30 to more than half of debt service falling interest rates probably had something to do with these changes okay you know if we have debt service in billions and we have the interest portion of it also in billions then we can calculate the difference the principal repayment portion of debt service i never had that number before secrets are revealed graph 4 the principal repayment portion of household debt service in billions of dollars going up no surprise there we can look at household debt principal repayment as a portion of household debt graph 5 principal repayment as a percent of household debt wandering i want to say it is going down but i see it trying to go up repayment of principal falls during the first two recessions shown and rises during the last two is this a change in behavior perhaps it s gotta be more difficult to make those payments in times of recession in the 1980s and 90s we were not so concerned about our debt household debt we let the principal payments fall before and during recessions but since 2000 we seem to be more concerned about our debt repayment of principal increases during recessions a change like that could have a significant negative effect on economic growth one more graph two more graphs i want to compare principal repayment to the change in household debt why because if new borrowing is gaining on principal repayment we re getting further behind graph 6 shows a ratio not a percent when principal repayment and the change in household debt are approximately equal the graph will show a value near 1 0 when principal repayment is greater the value will be above 1 0 and when principal repayment is less the value shown will be less than 1 0 graph 6 principal repayment relative to the change in household debt at first glance the plot appears to run close to 1 0 from start of data to the start of our recent troubles in other words for all that time since 1980 we were paying back nearly as much money as we borrowed things changed with the crisis of course but it appears that for 25 years or more we paid back amounts near equal to the amounts we borrowed however if you take a closer look this first glance conclusion does not hold up graph 7 principal repayment relative to the change in household debt 1980 2008 i chopped off everything after 2008 where things started going crazy you can see that the ratio reaches 1 0 just once during the 1982 recession just less than 1 0 actually in other words even during that very severe recession our new borrowing was more than we paid back the average repayment for the full period 2008 excluded looks to be about 0 6 or 60 of the addition to borrowing so that means if we borrowed 100 we paid back about 60 so the net was no it means if the data says the change in household debt was 100 new borrowing was actually 100 60 and principal repayment was 60 what that tells me i don t know but if every time i borrow 160 i only pay back 60 well that s the how and why of debt accumulation roger that posted by the arthurian at 4 00 am 0 comments saturday july 2 2016 real growth versus inflation syll links to mankiw who links to a pdf by alesina and ardagna who write as far as reduction of large public debts the lesson from history is reasonably optimistic large debt gdp ratios have been cut relatively rapidly by sustained growth this was the case of post world war ii public debts in belligerent countries it was also the case of the united states in the 1990s when without virtually any increase in tax rates or significant spending cuts a large deficit turned into a large surplus however it would probably be too optimistic to expect another decade like the 1990s ahead of us that kind of sustained growth would certainly do a lot to reduce the debt gdp ratio but the lower growth we will most likely experience will do much less inflation also has the effect of chipping away the real value of the debt but it may be ...
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