6 ms·

Musical chairs only call when the music stops. And the central bank is the band.

by ethbro 6y ago

danesparza 6y ago
IMO you are oversimplifying things... but even with your analogy, the Fed is predicting a more dire future: https://www.frbatlanta.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf https://www.frbatlanta.org/-/media/documents/cqer/researchcq...
- LegitShady 6y ago
  ...that document days it's not an official forecast just data model numbers without any adjustments
- ethbro 6y ago
  "GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model."
xxpor 6y ago
I think people who aren't making less than say, $50k a year are wildly underestimating the positive impact the extra $600 a week in unemployment is having. It was a huge win that (probably fortunately) slipped under the table during the bill negotiation.
- jrs235 6y ago
  Since most states unemployment insurance (UI) only pays a percent of full regular wages, it should have been "up to an additional $600 / week up to 100% (including state UI) of previous average weekly reported wages." So, if Bob made on average $800 per week, and his state pays UI at 60%, his state UI would be $480 / week leaving him $320 short per week. The additional federal money should have paid $320 / week to get him back to 100% of his $800 / week average.
  - xxpor 6y ago
    No, I disagree. The fact that people are getting more in UI than they made at their job is a feature, not a bug. First, we don't want people working in close quarters if they don't have to be. Second, It's almost a backdoor minimum wage increase, helping the neediest, who also happen to have the highest marginal propensity to consume. This has kept the economy actually relatively propped up. It's basically what people in 2008-2012 were screaming for, but never happened and it caused a dragged out recovery. Want to recover an economy? Literally just give people who don't have any money some money. It's that simple. And in a few years when everything settles down and there's been formal studies, I think expanded UI will prove it.
    - jrs235 6y ago
      Hmmmm... while it may be beneficial, I have serious difficulty believing that Congress really put that much thought into it. I'm more inclined to think it's a beneficial bug.
mywittyname 6y ago
Yeah, this is my thinking too. The Fed is going to continue pumping money into the markets to prop up prices. But they can't magically fix systemic issues within the economy itself. Providing liquidity (read, buying high-risk assets at a premium so institutional investors don't lose their asses) only works when investors are being forced to sell well-functioning assets at a discount due to a lack of buyers in the market (which is not the case currently). It's easy to prop up the stock price of a business, but if that company is still operating in a harsh economic environment, they still might need to cut staff and production, or could even go out of business. At this point, I really have no idea how bad things really are for businesses. Our clients seems cautiously optimistic: most are spending money; some have budgets allocated for projects, but are holding off pulling the trigger for a few months; and a few have cancelled projects. The nation is also seeing layoffs in non-retail sectors, but again, it's hard to say if this is because companies are using COVID as cover for something they've been wanting to do, or if this is the start of the downward spiral. My out-of-my-ass prediction is we see another, more substantial market retraction in September-October which has more staying power. And I don't think the cause will be COVID-related (but that's what the media will report), but instead will be the result of a collapse in supply chains across multiple industries as China-US relations further deteriorate, hampering the ability for manufacturing companies to buy raw materials combined with continuing bankruptcies in the agricultural sector. A Chinese invasion of Taiwan seems likely as well, especially given the domestic strife in the US that has leaders calling for military show-of-force. Weak US military morale / power struggles within the military, combined with a focus of attention inward should provide an opportunity for the Chinese to act unopposed.

Musical chairs only call when the music stops. And the central bank is the band.

by ethbro 6y ago

Musical chairs only call when the music stops. And the central bank is the band.

IMO you are oversimplifying things... but even with your analogy, the Fed is predicting a more dire future: https://www.frbatlanta.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf https://www.frbatlanta.org/-/media/documents/cqer/researchcq...

LegitShady 6y ago
...that document days it's not an official forecast just data model numbers without any adjustments
ethbro 6y ago
"GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model."

xxpor 6y ago

I think people who aren't making less than say, $50k a year are wildly underestimating the positive impact the extra $600 a week in unemployment is having. It was a huge win that (probably fortunately) slipped under the table during the bill negotiation.

jrs235 6y ago
Since most states unemployment insurance (UI) only pays a percent of full regular wages, it should have been "up to an additional $600 / week up to 100% (including state UI) of previous average weekly reported wages." So, if Bob made on average $800 per week, and his state pays UI at 60%, his state UI would be $480 / week leaving him $320 short per week. The additional federal money should have paid $320 / week to get him back to 100% of his $800 / week average.
- xxpor 6y ago
  No, I disagree. The fact that people are getting more in UI than they made at their job is a feature, not a bug. First, we don't want people working in close quarters if they don't have to be. Second, It's almost a backdoor minimum wage increase, helping the neediest, who also happen to have the highest marginal propensity to consume. This has kept the economy actually relatively propped up. It's basically what people in 2008-2012 were screaming for, but never happened and it caused a dragged out recovery. Want to recover an economy? Literally just give people who don't have any money some money. It's that simple. And in a few years when everything settles down and there's been formal studies, I think expanded UI will prove it.
  - jrs235 6y ago
    Hmmmm... while it may be beneficial, I have serious difficulty believing that Congress really put that much thought into it. I'm more inclined to think it's a beneficial bug.

mywittyname 6y ago

Yeah, this is my thinking too. The Fed is going to continue pumping money into the markets to prop up prices. But they can't magically fix systemic issues within the economy itself. Providing liquidity (read, buying high-risk assets at a premium so institutional investors don't lose their asses) only works when investors are being forced to sell well-functioning assets at a discount due to a lack of buyers in the market (which is not the case currently). It's easy to prop up the stock price of a business, but if that company is still operating in a harsh economic environment, they still might need to cut staff and production, or could even go out of business. At this point, I really have no idea how bad things really are for businesses. Our clients seems cautiously optimistic: most are spending money; some have budgets allocated for projects, but are holding off pulling the trigger for a few months; and a few have cancelled projects. The nation is also seeing layoffs in non-retail sectors, but again, it's hard to say if this is because companies are using COVID as cover for something they've been wanting to do, or if this is the start of the downward spiral. My out-of-my-ass prediction is we see another, more substantial market retraction in September-October which has more staying power. And I don't think the cause will be COVID-related (but that's what the media will report), but instead will be the result of a collapse in supply chains across multiple industries as China-US relations further deteriorate, hampering the ability for manufacturing companies to buy raw materials combined with continuing bankruptcies in the agricultural sector. A Chinese invasion of Taiwan seems likely as well, especially given the domestic strife in the US that has leaders calling for military show-of-force. Weak US military morale / power struggles within the military, combined with a focus of attention inward should provide an opportunity for the Chinese to act unopposed.