tag:blogger.com,1999:blog-4900303239154048192.post7292326305936185479..comments2024-03-06T06:34:42.881-05:00Comments on EconoSpeak: A Little Basic Economics Would Go a Long Way for Paul Kasriel and Joe NoceraUnknownnoreply@blogger.comBlogger8125tag:blogger.com,1999:blog-4900303239154048192.post-62919236992366083672011-09-21T16:14:37.059-04:002011-09-21T16:14:37.059-04:00Do you believe that Federal Reserve Credit is cred...Do you believe that Federal Reserve Credit is credit?Richardhttps://www.blogger.com/profile/17503926481274038448noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-22422440630762558452011-09-21T14:46:39.266-04:002011-09-21T14:46:39.266-04:00I haven't read MF on Japan, and that isn't...I haven't read MF on Japan, and that isn't the topic here. Can you find a single slide in the Kasriel presentation in which he addresses whether credit trends are due to supply-side or demand-side factors? Doesn't he simply assume that more credit creation (by the Fed) is the solution?<br /><br />To take a specific example, are you willing to defend slide 27, in which "bank credit" is treated as an exogenous variable for explaining changes in depression-era GDP alongside "federal outlays"? (And why federal outlays and not the combined govt deficit as a share of GDP? And no operation of lags?) Can you detect an effort to determine what may have caused movements in bank credit outstanding -- whether it was due to supply or demand?<br /><br />Seriously, isn't this econ 101 level stuff?Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-14771349686578251942011-09-21T14:05:40.032-04:002011-09-21T14:05:40.032-04:00You're still missing the point. He is not sayi...You're still missing the point. He is not saying that the Fed has the ability to create commercial credit, he is saying that the economy requires credit for growth and one form of credit is Federal Reserve Credit, which can be created out of thin air essentially. If commercial credit is 0, and the economy needs 7% credit growth to achieve a nom gdp target, than the Fed has the responsibility to fill that gap with Federal Reserve Credit. Read Milton Friedman's piece on Saving Japan to get the idea. Or maybe Friedman doesn't get S&D either?Richardhttps://www.blogger.com/profile/17503926481274038448noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-26901638868836847622011-09-21T08:49:18.768-04:002011-09-21T08:49:18.768-04:00Richard,
I admit to avoiding mirrors whenever pos...Richard,<br /><br />I admit to avoiding mirrors whenever possible, but mostly that's because I like to imagine I'm still 30.<br /><br />Other than that, I don't think there's any need to change my take on Kasriel (and Nocera). Yes, of course, private sector lending is way down. But the magic of open market operations works only if the cause is insufficient supply. The effect of QE is simply to lower interest rates in whatever segment of the market the Fed enters. The zero lower bound problem (aka liquidity trap) arises if demand is so depressed, however, that easy money doesn't get credit flowing. There is less mortgage credit, for instance, because households are trying to pay down their debts, and because, with (according to Case-Schiller) a still overvalued market and widespread unemployment, lenders are understandably wary of default risk.<br /><br />Bottom line: the Fed can do its part (more QE to bring down long rates etc.), but pumping up demand will generate credit creation, not the other way around.<br /><br />Incidentally, I have not referred to the banks as evil, and bank morality plays no role in my analysis. You may want to consider why you assumed otherwise -- another mirror moment?Peter Dormanhttps://www.blogger.com/profile/00093399591393648071noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-82212212934763673582011-09-20T20:54:15.064-04:002011-09-20T20:54:15.064-04:00Dorman
My guess is that the deleted comments are t...Dorman<br />My guess is that the deleted comments are the most amusing. We can all use a good laugh. Why not create a deleted comments file available to all who need an intellectual R&R.Jackhttps://www.blogger.com/profile/12971442888151627894noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-73493816172831224272011-09-20T20:52:19.867-04:002011-09-20T20:52:19.867-04:00I feel it my civic duty to correct this post. You ...I feel it my civic duty to correct this post. You would benefit from reading the actual article. He does not assume that it is a supply problem and the banks aren't lending bc they're evil, he is merely stating that there is a significant lack of credit being created in the economy and that is a huge problem, whatever the reason, supply or demand driven. The point is that if commercial credit isn't being generated, the Fed needs to step in and create credit, which is what happens through the QE mechanism. Next time you're assuming that an economist like kasriel doesn't understand supply and demand, you should probably take a look in the mirror and also the actual article that you're lambasting.Richardhttps://www.blogger.com/profile/17503926481274038448noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-65567078634065424522011-09-20T20:49:19.515-04:002011-09-20T20:49:19.515-04:00This comment has been removed by the author.Richardhttps://www.blogger.com/profile/17503926481274038448noreply@blogger.comtag:blogger.com,1999:blog-4900303239154048192.post-2645186319168146152011-09-20T17:40:37.041-04:002011-09-20T17:40:37.041-04:00The economic problems and the jobs problem are joi...The economic problems and the jobs problem are joined at the hip. The former is dependent on the latter for its resolution. The jobs problem has been buildiing for three decades with the continuous exportation of the manufacturing process, euphamistically and antiseptically referred to as "outsourcing." With the loss of manufacturing jobs came a fight for the scraps left over in the U.S. jobs market. The miracle of the service industries supplied some replacement jobs at the cost of worker income. Now we are left with far fewer and lower paying jobs. So there in is the sad dilemma of our economy. No demand means no need for supply and that means the economy sucks. It really isn't any more complex than that. Economics isn't rocket science unless you want to avoid the actual answers to the real problems.Jackhttps://www.blogger.com/profile/12971442888151627894noreply@blogger.com