Just because nominal rates are low, doesn't mean monetary policy is actually loose or expansionary. Here is a quote from an ecomonics textbook (Mishkin's):“It is dangerous always to associate the easing or the tightening of monetary policy with a fall or a rise in short-term nominal interest rates.” Declining inflation has shown that monetary policy actually has been too tight over the last couple years, and that it actually IS a constraint on growth. A lot of people are fooled by the nominal rate. If the benchmark interest rate was around 5% instead of 0%, would you advocate the Fed ease?
InflationData.com Current Annual Inflation Rate HTML: Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave 2010 2.63% 2.14% 2.31% 2.24% 2.02% 1.05% 1.24% 1.15% 1.14% NA NA NA NA 2009 0.03% 0.24% -0.38% -0.74% -1.28% -1.43% -2.10% -1.48% -1.29% -0.18% 1.84% 2.72% -0.34% 2008 4.28% 4.03% 3.98% 3.94% 4.18% 5.02% 5.60% 5.37% 4.94% 3.66% 1.07% 0.09% 3.85% 2007 2.08% 2.42% 2.78% 2.57% 2.69% 2.69% 2.36% 1.97% 2.76% 3.54% 4.31% 4.08% 2.85% 2006 3.99% 3.60% 3.36% 3.55% 4.17% 4.32% 4.15% 3.82% 2.06% 1.31% 1.97% 2.54% 3.24% 2005 2.97% 3.01% 3.15% 3.51% 2.80% 2.53% 3.17% 3.64% 4.69% 4.35% 3.46% 3.42% 3.39% 2004 1.93% 1.69% 1.74% 2.29% 3.05% 3.27% 2.99% 2.65% 2.54% 3.19% 3.52% 3.26% 2.68% 2003 2.60% 2.98% 3.02% 2.22% 2.06% 2.11% 2.11% 2.16% 2.32% 2.04% 1.77% 1.88% 2.27% 2002 1.14% 1.14% 1.48% 1.64% 1.18% 1.07% 1.46% 1.80% 1.51% 2.03% 2.20% 2.38% 1.59% 2001 3.73% 3.53% 2.92% 3.27% 3.62% 3.25% 2.72% 2.72% 2.65% 2.13% 1.90% 1.55% 2.83% 2000 2.74% 3.22% 3.76% 3.07% 3.19% 3.73% 3.66% 3.41% 3.45% 3.45% 3.45% 3.39% 3.38% Note: Red indicates Deflation, NA indicates data not yet released. Get more Historical Data from InflationData.com I want you look what is happening. When the boom ended near the end of 2008, the inflation rate was around 5%. After collapse, the inflation rate went into negative territory - that is, prices were dropping. We recovered a bit because of the stimulus, and the inflation rate approaches 3% early this year before the economy stalls and is again flirting with dropping below 1%. We don't want deflation - that's actually bad. The Fed is increasing the money supply to stimulate the economy and yes, drive inflation rate to around 3%. Our economy is in need of stimulus badly but we can't do it because the gov't is essentially broke. Now - you say the whole Americans just stopped spending. Well, remember a lot of spend is on imports, and also remember that it's not only because Americans aren't spending, they are SCARED to spend - they are saving because they are worried, and thus the economy drags on and on. Loosening the credit marks drives all rates down...lower credit card rates, lower mortgage rates, lower everything. What happens when people are paying less on interest on the stuff they owe, and getting less return on investments? They start to spend. Amazing, isn't it?
Palin and Bernanke should absolutely debate this on live TV. It'll be Pay-per-view. They'll charge $20, or a security backed by $1 million of California mortgages.
No real proof, but listening to her talk and reading her tweets and such, then comparing them to this piece... well, there is a difference. I think my 10th grade English teacher would call those differences "complete sentences." You do realize this piece was taken straight out of her "prepared" remarks for a trade convention, right? You do realize she's shown no ability or interest to discuss monetary policy with any detail before? Yet here she is giving a treatise on the subject in response to the Fed's actions? Hard to believe she's responsible for the content. Anyway, the content is also wrong... Deflation, not inflation is the big concern.
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more like since post-WW2 concur. the only thing that the quitter knows about economics is that she doesn't understand it.
how odd then, that she seems to be right, so often: -- Sarah Palin for the Fed? Editorial of The New York Sun | April 24, 2011 Print Send Comment Share The big question as Chairman Bernanke gets set for his first quarterly press conference is how Sarah Palin was able to figure out sooner than everyone else that the Federal Reserve’s campaign of quantitative easing wouldn’t work. Disappointment in the Fed’s policies is being reported this morning at the top of page one of the New York Times. It reports that “most Americans are not feeling the difference” from the Fed’s “experimental effort to spur a recovery by purchasing vast quantities of federal debt.” It reports that “a broad range of economists say that the disappointing results show the limits of the central bank’s ability to lift the nation from its economic malaise.” It’s a terrific story, and well-timed, given that on Wednesday Mr. Bernanke will break tradition and meet with the press. It is part of the Fed’s effort to get ahead of what is emerging as a public relations catastrophe, as gasoline is nearing six dollars a gallon at some pumps, the cost of groceries is skyrocketing, and the value of the dollars that Mr. Bernanke’s institution issues as Federal Reserve notes has collapsed to less than a 1,500th of an ounce of gold. Unemployment is still high. Shakespeare couldn’t come up with a better plot. But how in the world did Mrs. Palin, who is supposed to be so thick, manage to figure all this out so far ahead of the New York Times and all the economists it talked to? She did this back in November in a speech at Phoenix, which the Wall Street Journal, in a laudatory editorial at the time, characterized as zeroing in on the connection between a weak dollar and rising prices for oil and food. “We don’t want temporary, artificial economic growth brought at the expense of permanently higher inflation which will erode the value of our incomes and our savings,” the Journal quoted Mrs. Palin as saying. “We want a stable dollar combined with real economic reform. It's the only way we can get our economy back on the right track.” Now here is the New York Times quoting a raft of economists who have reached the conclusion that Mrs. Palin’s warning was right down the line. It happens that Mrs. Palin’s demarche coincided with a piece in the Financial Times by the president of the World Bank, Robert Zoellick, suggesting that a new international monetary system centered on the major currencies “should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.” The FT is such a Keynesian bastion that the Journal likened Mr. Zoellick’s mentioning gold in its pages to mentioning Sarah Palin’s name at the Princeton Faculty Club. The FT issued an editorial attacking its own op-ed piece, while Mr. Zoellick’s scoop so startled the New York Times that it brought in no less a heavyweight than James Grant of the Interest Rate Observer to write a piece on the virtues of the gold standard. Alone amont general interest publications, the Drudge Report has been fronting the gold price almost daily. And now the Times itself is out with its a story about how the Fed’s quantitative easing has been a disappointment. It may have, as the Times puts it, “pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates,” but “those benefits have been surprisingly small.” Will any of this bring some humility to the Fed and its chairman? It will be something to watch for in his first big press conference Wednesday. No doubt it will be one of the most crowded press conferences in recent memory, and there will be lots to ask about. But one of the questions will be how in tarnation Mrs. Palin figured it out so far ahead of everyone else. http://www.nysun.com/editorials/sarah-palin-for-the-fed/87317/
have you seen her talk about any of these issues years back? Se was just a motivational speech/figure, etc. The reason she is so careful of where she speaks, who speaks to her, and what questions they ask(she controls all of this before going anywhere) is bc she is still that C student. The fact that she was mediocre in her performance from being a kid to now says something about her. She will rile people up and say that she didn't goto an 'elite' exclusivist university, but its not like barak, bill clinton or many others were handed those experiences, its a meritocracy. They out performed everyone else and made it to have the best resources, isn't that similar to capitalism, they were just better and earned there way to the 'exclusive' 'elite' universities. She rags on them for that and says she has common sense and that is all she needs. Then she goes on to admire the founding fathers, who almost all of them studied at the same 'elite' universities. She contradicts herself so much its almost alarming and embarrassing that she has credibility. Its not even about right or left, there are plenty of people on the right I consider to be intelligent, but she is just an embarrassment for America. That said, you'll notice the difference in substance over the past few years and basically, now she has celebrity and loads of money, so basically a better staff for her material to right it in and tell her what to say. You put her back in an unscripted debate, shell be back to using catch phrases to get by and rile up crowds and be lost again
What, specifically, was she right on? She predicted lots of inflation and high oil prices. There is no inflation of note, but oil prices have gone up - due to a bunch of craziness in Africa & the Middle East along with a booming economy in the emerging world. None of that has anything to do with QE2, which has actually done exactly what was intended.
Certainly - speculators also play a role in the market. Every dollar made by a speculator is a dollar more that a buyer has to pay or a seller does not get. That's just basic math. But this most recent spike coincided perfectly with the Africa turmoil, not a speculation binge or a dollar drop or QE2.
I just bought "Griftopia"...going to start it tonight. Are there any other books that someone can recommend? maybe an unbiased view of the economy over the past 30 years. I really want to understand the ins and outs of how policies under the various administrations altered the economic climate, but everything I've been recommended seems laced with ulterior motives.
