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h p for rgdp growth in red graph 7 h p trend from graph 4 blue and h p trend from graph 6 red i would want to argue that rgdp responds to changes in fed holdings looks like there are some timing issues to deal with variable lags but my day s energy is all used up and i don t want to get into it now maybe another day i will say only that the blue line shows policy and the red shows the result of policy afterthoughts the constant used in the h p calculations is 1600 all data are quarterly here s my excel file note the file contains kurt annen s vba code for the hodrick prescott posted by the arthurian at 4 00 am 3 comments saturday july 9 2016 get an education raghuram rajan what is the alternative to creating new mountains of consumer debt instead of looking for ways to resuscitate spending by those who can ill afford it and creating unsustainable bubbles in the process we need to think creatively about how americans can acquire the skills they need to enhance their incomes acquire the skills rajan says if your accumulation of debt is too big he says get an education you ll make more income and get out of debt fallacy of composition it works for the individual it doesn t work for the economy as a whole money comes from somewhere if we don t borrow it we have to get it from someone else if the stock of circulating money the money we can get from someone else as income is insufficient then the economy does not have the money we need unless we borrow it this is not a problem that can be solved by education it can only be solved by economic policy that considers the quantity of circulating money and the level of accumulated debt graph 1 total debt per dollar of m1 money 1916 2015 posted by the arthurian at 4 25 am 0 comments friday july 8 2016 in case you didn t read all the way to the end what i said to larry summers last time we need to get interest costs down to get economic growth so that we can raise interest rates and undermine that growth this is your plan for the economy what s to understand larry you crack me up all this focus on interest rates and no focus at all on the number of dollars on which interest must be paid you guys cut interest rates as low as they can go now you re trying silly stuff with negative rates an act of desperation to be sure but you pay no attention to the accumulation of debt it s the accumulation of debt that created the need for low rates cut debt in half larry and you cut interest costs in half what s to understand posted by the arthurian at 4 00 am 0 comments thursday july 7 2016 dear larry notes on larry summers s interest rates are at inconceivable levels and we must confront what that means larry you are thinking inside the box the u s 10 and 30 year interest rates on wednesday reached all time lows of 1 32 percent and 2 10 percent such rates would have seemed inconceivable a decade ago e xtraordinarily low rates reflect both sub target expected inflation even over long horizons and very low real interest rates remarkably the market does not now expect a full fed tightening until early 2019 this is despite all the fed speeches expressing optimism about the economy and a desire to normalize interest rates there is a growing sense that the world is demand short that the real interest rates necessary to equate investment and saving at full employment are very low and often may be unattainable first of all larry you are explaining demand short in terms of interest rates don t do that it gets you to interest rates too soon actually you skipped the explanation altogether and went straight to your conclusion that the interest rates we need are unattainably low let s say you re right then the question is why why are rates so low and how did rates get that way in other words larry we still need an explanation and then maybe it is not the need for low rates that is the problem maybe it is the thing that created the need for low rates that is the problem see how that works the situation is different now not like before the crisis the situation is different but your thinking is no different you are still relying on concepts and short cuts that you used back in 1991 when you were wrong about the 4 5 mortgage rate being an antique in truth larry there is no remedy except to throw over the axiom of parallels and to work out a non euclidean geometry if you get my drift second are you relying on loanable funds theory sounds like it savings and investment are not made equal by interest rates they are made equal by accounting convention and then larry and then you look at the world around you you describe what you see and you call it the result of the conclusion that you jumped to look what you wrote larry there is a growing sense that the world is demand short that the real interest rates necessary to equate investment and saving at full employment are very low and often may be unattainable given the bounds on nominal interest rate reductions the result is very low long term real rates sluggish growth expectations concerns about the ability even over the fairly long term to get inflation to average 2 percent and a sense that the fed and the world s major central banks will not be able to normalize financial conditions in the foreseeable future so having fitted the post crisis world to your pre crisis economics and having identified the problem by proclamation you now move on and consider solutions having the right worldview is essential if there is to be a chance of making the right decisions good point larry i agree with that here are the necessary adjustments first with differences between countries neutral real interest rates are likely close to zero going forward there is no good reason to think given sluggish investment expectations that the neutral rate will rise to be significantly positive in the foreseeable future substantial continued reductions in fed estimates of the real neutral rate lie ahead larry you are doing it again starting with low interest rates fact is interest rates in the u s have been drifting down hill since 1981 maybe we should think about that maybe we should think about why that don t start with interest rates being low at the moment that s what you thought about your parents mortgage rate think instead about why rates went down for 34 years maybe there is more to it than just interest rates get my drift larry having the right worldview is essential without it you end up saying things like substantial continued reductions in fed estimates of the real neutral rate lie ahead they ve been lowering rates for 34 years larry and now they ve reached the zero bound the only interest rate left for them to lower is their estimate of the real neutral rate you re not telling me anything useful larry anyway you got to your conclusion by jumping second as counterintuitive as it is to central bankers who came of age when the inflation of the 1970s defined the central banking challenge our problem today is insufficient inflation no larry our problem is not insufficient inflation third in a world where interest rates over horizons of more than a generation are far lower than even pessimistic projections of growth traditional thinking about debt sustainability needs to be discarded in the u s the u k the euro area and japan the real cost of even 30 year debt will be negative or negligible if inflation targets are achieved indeed the conditions brad delong and i set out in 2012 for expansionary fiscal policy to pay for itself are much more easily satisfied today than they were at that time thinking inside the box larry the keynesian box keynes said deficit spending so larry summers says deficit spending get out of the box larry think for yourself we ve had 80 years of deficit spending in the public and private sectors maybe it is time for something else get out of the box want a hint i ll give you a hint what happens when you have 80 years of deficit spending in the public and private sectors you accumulate a lot of debt that s what happens larry hint maybe the problem is too much debt anyhow why are you still talking about public debt everybody knows keynes said increase the public debt you say that is the solution again now other people say public debt was the problem then and is the problem now nobody says fuckall about private debt get out of the box larry this isn t 1936 the facts are different when events change i change my mind what do you do fourth the traditional suite of structural policies to promote flexibility are not especially likely to be successful in the current environment though some structural policy approaches such as removal of restrictions on investment are still desirable indeed in the presence of chronic excess supply structural reform has the risk of spurring disinflation rather than contributing to a necessary increase in inflation there is in fact a case for strengthening entitlement benefits so as to promote current demand is larry the traditional suite of policies is not likely to be successful if you re going to say it larry at least get the grammar right larry larry larry first you say some structural policy approaches such as removal of restrictions on investment are still desirable then you say in the presence of chronic excess supply structural reform has the risk of spurring disinflation i know when the facts change you have to change your mind but you changed your mind mid paragraph the facts didn t have time to change and then oh my you say there is in fact a case for strengthening entitlement benefits so as to promote current demand you re a case larry you get things we need mixed up with policies we should put in place instead of doing something about income inequality you would increase entitlements to promote current demand have you forgotten what an economy is do you not know how an economy works and that brings us to your concluding paragraph there is much more to be said about policy going forward but treatments without accurate diagnoses have little chance of success we need to begin with a much clearer diagnosis of our current malaise than policymakers have today the level of interest rates provides a very strong clue i absolutely agree that an accurate diagnosis is required that s why i m writing to you today larry but that thing about interest rates you have to re think that you said it yourself interest rates are inconceivably low and we must figure out what it means here let me lay it out for you larry interest rates are at record lows and still going lower you told me as much the fed wants to normalize rates wants to get rates back to normal but markets don t expect a hint of normal till at least 2019 of course if there is any hint of inflation or any hint of vigor in the economy rates will rise and cap off the vigor right away meanwhile it s all downhill you told me so we need to get interest costs down to get economic growth so that we can raise interest rates and undermine that growth this is your plan for the economy what s to understand larry you crack me up all this focus on interest rates and no focus at all on the number of dollars on which interest must be paid you guys cut interest rates as low as they can go now you re trying silly stuff with negative rates an act of desperation to be sure but you pay no attention to the accumulation of debt it s the accumulation of debt that created the need for low rates cut debt in half larry and you cut interest costs in half what s to understand posted by the arthurian at 12 00 pm 1 comments thoma marc thoma globalization and international trade were supposed to make us all better off there would be adjustment costs along the way but in the long run more trade would lift all boats but that hasn t happened the creation of the eu was a political solution to economic problems it was sold to the voters as a solution to economic problems it would make the economy better the voters were told it didn t make things better it didn t address the fundamental economic problems it only opened a door to the increased consolidation and concentration of wealth posted by the arthurian at 4 00 am 0 comments labels c d of wealth wednesday july 6 2016 the new characterization forecast from the new characterization pdf from james bullard at the st louis fed the upshot is that the new approach delivers a very simple forecast of u s macroeconomic outcomes over the next 2½ years over this horizon the forecast is for real output growth of 2 percent an unemployment rate of 4 7 percent and trimmed mean pce inflation of 2 percent in light of this new approach and the associated forecast the appropriate regime dependent policy rate path is 63 basis points over the forecast horizon the pdf is dated 17 june 2016 let s say the next 2½ years includes the second half of 2016 plus all of 2017 and 2018 the new characterization predicts real growth unemployment and inflation thru the end of 2018 a footnote on trimmed mean pce inflation reads we will refer to inflation as measured by the 12 month dallas fed trimmed mean inflation rate throughout this memo as we think it is the best indicator of inflation trends the most current reading is 1 84 percent links http www dallasfed org research pce https fred stlouisfed org search st trimmed mean pce inflation rate by the 12 month inflation rate i m thinking they mean what fred calls percent change from 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 lo...