tag:blogger.com,1999:blog-7464708.post3660745068204564891..comments2024-03-22T06:05:36.544-04:00Comments on Kids Prefer Cheese: Did someone say monetary expansion?Mungowitzhttp://www.blogger.com/profile/02340064320347875601noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-7464708.post-38609149673427959792011-10-25T23:09:51.438-04:002011-10-25T23:09:51.438-04:00Late returning Angus, but what you were saying was...Late returning Angus, but what you were saying was not "the Fed has not done nothing." It was it's not true that "policymakers have not done nearly enough" -- just look at this picture! It's huge! How could it not be enough?! <br /><br />Okay, that last part's not obvious from the text. Close, though.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7464708.post-36629931427352261442011-10-07T15:43:37.457-04:002011-10-07T15:43:37.457-04:00Reserves that pay interest are not money in any me...Reserves that pay interest are not money in any meaningful sense, they are a form of bonds. Notice any similarity to your graph?<br />http://research.stlouisfed.org/fred2/series/EXCRESNSJames Oswaldhttp://azmytheconomics.wordpress.comnoreply@blogger.comtag:blogger.com,1999:blog-7464708.post-45785147556636686612011-10-06T19:47:30.401-04:002011-10-06T19:47:30.401-04:00"I would say that from looking at the graph t..."I would say that from looking at the graph that it's not obvious to me that an even further expansion of the monetary base will do much good at this point."<br /><br />I completely agree with this. Unless the Fed's preferences change from the 1-2% inflation target range, there's no reason to believe money demand won't just soak up additional reserves.<br /><br />Again, it's the target, not the base.Normanhttps://www.blogger.com/profile/12866136113454261245noreply@blogger.comtag:blogger.com,1999:blog-7464708.post-35700955861174844112011-10-06T14:27:26.972-04:002011-10-06T14:27:26.972-04:00@anon 1:58. I am not making any such argument. I a...@anon 1:58. I am not making any such argument. I am just pointing out that the Fed has not done nothing.<br /><br />I would say that from looking at the graph that it's not obvious to me that an even further expansion of the monetary base will do much good at this point.Angushttps://www.blogger.com/profile/03656436431053306500noreply@blogger.comtag:blogger.com,1999:blog-7464708.post-56881746285251877042011-10-06T13:58:30.576-04:002011-10-06T13:58:30.576-04:00Let me paraphrase the argument:
"Of course i...Let me paraphrase the argument:<br /><br />"Of course it's big enough! Just look at it! No, don't bother with any analysis - just look at the size of it!"Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7464708.post-39821164340030341942011-10-06T13:09:00.248-04:002011-10-06T13:09:00.248-04:00"Looks to me like evidence that what matters ..."Looks to me like evidence that what matters is the target, not the base."<br /><br />This. That graph shows an aspect of the supply-side. That's only half the picture. The whole point is that money demand has skyrocketed. <br /><br />In a world of free banking, each bank trying to maximize its profits leads to the fortunate (unintended) consequence of maintaining monetary equilibrium, i.e. stabilizing NGDP. It seems reasonable, in a second-best world, to have the Fed attempt to mimic that outcome. If you object based on political economy/public choice reasons, that's fine. However, you can't just show the supply-side without mentioning the demand-side and declare monetary equilibrium theorists/market monetarists are nuts.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7464708.post-12112682054411174552011-10-06T12:43:48.086-04:002011-10-06T12:43:48.086-04:00Without a change in the Fed's preferences, sho...Without a change in the Fed's preferences, shouldn't we expect this? Dumping massive amounts of reserves into the system should have disappointing effects because no one should believe it's permanent. <br /><br />Looks to me like evidence that what matters is the target, not the base.Normanhttps://www.blogger.com/profile/12866136113454261245noreply@blogger.comtag:blogger.com,1999:blog-7464708.post-73221606603324402232011-10-06T10:22:27.926-04:002011-10-06T10:22:27.926-04:00If you want to see something scary, look at excess...If you want to see something scary, look at excess reserves held by banks. In Aug 2008, they were $1.875 billion, by Aug 2011 they were up to 1,583.525 billion.<br /><br />They've increased about 845 times, not percent, times. Eight-Hundred-Forty-Five Times.<br /><br />The Fed thinks they can pull that out of the system before significant inflation starts. I sincerely hope they will be able to. (Secondarily, it really makes QEI and QEII look more like bailouts than stimulus.)Hasdrubalhttps://www.blogger.com/profile/05295916292724337509noreply@blogger.com