3 ms·

This upsets me because it is such an unnecessary and predictable result. The mentality and fiscal politics of a nation matter. “The Chinese won’t sell to us,”

by johnnyg 10y ago

This upsets me because it is such an unnecessary and predictable result. The mentality and fiscal politics of a nation matter. “The Chinese won’t sell to us,” said a taxi driver who watched the crowd haul away all that was inside. “So we burn their stores instead.” You'll eat tonight, but at the cost of the rest of the output of that store - if you even got the food out before you burned it. While I suppose the time to be philosophical is before the starving crowd gathers in front of the grain store, this is still madness. Further, the mentality and fiscal politics and a connected world matter. In the US and all developed nations, our quantitative easing programs are an abstracted, less violent but fiscally equivalent analog to burning a store or selling the future for the present. The consequences of these choices will also come to our door in time. If they gave me the stick, I'd set interest rates at 3% and hold the line through a recession or depression. Far better that then coming to the end of the line, having no options and no way out.

wrong_variable 10y ago
In the US and all developed nations, our quantitative easing programs are an abstracted, less violent but fiscally equivalent analog to burning a store or selling the future for the present. The consequences of these choices will also come to our door in time. How come ?
nickles 10y ago
>If they gave me the stick, I'd set interest rates at 3% and hold the line through a recession or depression. Far better that then coming to the end of the line, having no options and no way out. It's a good thing you don't have the stick. I'd liken such a policy to the Taylor Rule, which can produce ridiculous results, but even that relies on macroeconomic data at all times. If your policy is such that 3% is the new lower bound, you have just created the lower bound you seek to avoid. At present, there is no lower bound. Many countries are employing negative interest rates to attempt to stimulate their respective economies. A notable exception is Switzerland, which maintains negative rates primarily to devalue its currency (of course the magnitude of the exception is debatable). While negative interest rates are not well understood, they are utilized. Central banks have additional tools at their disposal as well, like ON RRP, which means that talking about a single 3% rate is poorly specified. Ultimately though, we are encountering the limits of monetary policy and governments should be considering a fiscal approach, especially with such low interest rates. At a fixed 3%, fiscal policy is less appealing even when absolutely necessary.
nickik 10y ago
Wow this comment is ignorant. Not a single economist in the world would agree to your insane 3% rule. That rule is so absurd that its hard to even argue against it. Comparing QE to people burning down a store is also totally wrong. You seem to have never picked up an economic book in your life. Just because economics is not physics does not mean you can just shit all over the thought of millions of smart people who have studied these issues. If your rule would be applied you would wish that you lifed in the great depression. I have studied many different school of economics, from 1400 spanish monks to modern day schools. Not a single one would think your "proposle" is anything put insanity.

by johnnyg 10y ago

wrong_variable 10y ago

In the US and all developed nations, our quantitative easing programs are an abstracted, less violent but fiscally equivalent analog to burning a store or selling the future for the present. The consequences of these choices will also come to our door in time. How come ?

nickles 10y ago

>If they gave me the stick, I'd set interest rates at 3% and hold the line through a recession or depression. Far better that then coming to the end of the line, having no options and no way out. It's a good thing you don't have the stick. I'd liken such a policy to the Taylor Rule, which can produce ridiculous results, but even that relies on macroeconomic data at all times. If your policy is such that 3% is the new lower bound, you have just created the lower bound you seek to avoid. At present, there is no lower bound. Many countries are employing negative interest rates to attempt to stimulate their respective economies. A notable exception is Switzerland, which maintains negative rates primarily to devalue its currency (of course the magnitude of the exception is debatable). While negative interest rates are not well understood, they are utilized. Central banks have additional tools at their disposal as well, like ON RRP, which means that talking about a single 3% rate is poorly specified. Ultimately though, we are encountering the limits of monetary policy and governments should be considering a fiscal approach, especially with such low interest rates. At a fixed 3%, fiscal policy is less appealing even when absolutely necessary.

nickik 10y ago

Wow this comment is ignorant. Not a single economist in the world would agree to your insane 3% rule. That rule is so absurd that its hard to even argue against it. Comparing QE to people burning down a store is also totally wrong. You seem to have never picked up an economic book in your life. Just because economics is not physics does not mean you can just shit all over the thought of millions of smart people who have studied these issues. If your rule would be applied you would wish that you lifed in the great depression. I have studied many different school of economics, from 1400 spanish monks to modern day schools. Not a single one would think your "proposle" is anything put insanity.