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This has very little to do with $600 checks and everything to do with the policy response to 2008. We’ve had over a decade of cheap money creating asset price

This has very little to do with $600 checks and everything to do with the policy response to 2008. We’ve had over a decade of cheap money creating asset price inflation and exacerbating inequality, not to mention the total collapse of the home building for several years and the exodus of qualified talent from that period drained much needed supply from the market. All of this happening while the largest generation since the baby boom entered prime home buying age. This has been a 15 year trend. It didn’t start yesterday and it won’t end for a long time.

adam_arthur 5y ago
And when the Fed went to course correct in 2018, they immediately bailed after markets started to decline to historically normal levels. Fiscal policy should be used to address economic gaps, not distortion through monetary policy. Of course, very hard to achieve alignment and consensus in the US political system. Despite the inflation, it's pretty clear the recovery after 2008 could have been much more rapid with greater fiscal injections. The Fed should be an algorithm IMO. Way too politically influenced.
- wbsss4412 5y ago
  Your last sentence really hits the nail on the head. In a lot of ways, the feds hands are tied by the political dysfunction in our political branches. They’re just putzing along, trying to plug the holes in a leaky ship.
  - adam_arthur 5y ago
    Yeah, and they tend to operate with short term thinking front of mind. I mean the Fed didn't even flinch at all in 2021 as all asset valuations reached bubble territory. Real estate appreciated faster than anytime in history. This becomes a real liability down the line if normalization of policy is ever needed. Bubbles can be disastrous to the economy longer term. They removed the moral hazard of risk taking for the past decade or so.
    - wbsss4412 5y ago
      I think it’s less short term thing vs being plain reactive. The policy response to 2008 has shown that next to nothing is going to happen on the fiscal side (though this did change in response to COVID, hopefully this is a positive sign), so the fed has been backed into a corner without a whole lot of room to run. When a major swing happens, if they do nothing, then it’s “the fed let a recession happen!!!”
      - adam_arthur 5y ago
        Not that they should have done nothing, but clearly they could have addressed the acute crisis, and then normalized when that passed. Instead they addressed the acute crisis, and continued the same policy for 2 years with no change. What they should have done was 6 months or so after peak covid panic, start to normalize interest rates and QE. They also didn't consider at all the velocity of the economy and just looked at point in time employment numbers to drive their policy thinking. It was clear the job market was already overheated at 5% unemployment, for example, due to the historical number of job openings and increasing pace of those job openings, plus record high quits rate. Plus retail sales/inflation.
  - dragonwriter 5y ago
    > In a lot of ways, the feds hands are tied by the political dysfunction in our political branches It's not so much that the Fed’s “hands are tied” preventing them from monetary policy they should, as a central bank, take. Rather, Congress just isn't taking fiscal policy actions that they, as the government outside of the central bank, should take, and (in some cases, especially on the Right) blaming the Fed for for their own nonfeasance.
- p_j_w 5y ago
  >And when the Fed went to course correct in 2018, they immediately bailed after markets started to decline to historically normal levels. I suspect Jerome Powell will be looked back on as a disaster. That Biden renominated him out of deference to the political norms that were broken to get him in place is a massive black mark on his record.
- dragonwriter 5y ago
  > And when the Fed went to course correct in 2018, they immediately bailed after markets started to decline to historically normal levels. “Markets” you are discussing aren't part of the Fed dual (actually, triple) mandate, and are of only intermediate, instrumental relevance. > Fiscal policy should be used to address economic gaps, Yeah, but Congress has been basically asleep at the switch on fiscal policy for a long time, and to the effect their failures effect the things that are part of the Fed mandate, it is legally the Fed’s job to act via monetary policy, whether or not fiscal rather than monetary policy is the better choice.
  - adam_arthur 5y ago
    I'm very familiar with the Fed and their mandates. To say they don't consider asset prices is simply wrong judging by history. If they didn't care about markets, they would have ended QE abruptly, and started raising rates months ago. They only avoided doing this to prevent a market selloff. Every rational thinking person thinks it's absurd for them to be buying MBS when housing is appreciating at record levels amid an inflationary environment. They spend a lot of time talking about market expectations, market levels in their notes. They also have a price stability mandate that they've ignored for over a year.
    - dragonwriter 5y ago
      > To say they don't consider asset prices I didn't say that, though. I contextualized the role of those prices as intermediate and instrumental rather than ultimate goals (and, as such, they are targeted for what, in consideration of other circumstances, they appear to indicate about the things that are mandate goals.)
      - adam_arthur 5y ago
        Clearly correcting the market would help resolve inflationary pressures, while not seriously dampening the jobs market. So if your supposition is correct, they should engineer a decline in the market and real estate to achieve their price stability mandate. Yet everything they do is dragging their feet to support asset prices. So I agree with your assessment in theory, but don't see them living or acting by that logic. They could have ended QE overnight in January, for example. Why not? They continue to pursue low volatility when the times of today warrant higher volatility and less risk taking/speculation.

adam_arthur 5y ago

And when the Fed went to course correct in 2018, they immediately bailed after markets started to decline to historically normal levels. Fiscal policy should be used to address economic gaps, not distortion through monetary policy. Of course, very hard to achieve alignment and consensus in the US political system. Despite the inflation, it's pretty clear the recovery after 2008 could have been much more rapid with greater fiscal injections. The Fed should be an algorithm IMO. Way too politically influenced.

wbsss4412 5y ago
Your last sentence really hits the nail on the head. In a lot of ways, the feds hands are tied by the political dysfunction in our political branches. They’re just putzing along, trying to plug the holes in a leaky ship.
- adam_arthur 5y ago
  Yeah, and they tend to operate with short term thinking front of mind. I mean the Fed didn't even flinch at all in 2021 as all asset valuations reached bubble territory. Real estate appreciated faster than anytime in history. This becomes a real liability down the line if normalization of policy is ever needed. Bubbles can be disastrous to the economy longer term. They removed the moral hazard of risk taking for the past decade or so.
  - wbsss4412 5y ago
    I think it’s less short term thing vs being plain reactive. The policy response to 2008 has shown that next to nothing is going to happen on the fiscal side (though this did change in response to COVID, hopefully this is a positive sign), so the fed has been backed into a corner without a whole lot of room to run. When a major swing happens, if they do nothing, then it’s “the fed let a recession happen!!!”
    - adam_arthur 5y ago
      Not that they should have done nothing, but clearly they could have addressed the acute crisis, and then normalized when that passed. Instead they addressed the acute crisis, and continued the same policy for 2 years with no change. What they should have done was 6 months or so after peak covid panic, start to normalize interest rates and QE. They also didn't consider at all the velocity of the economy and just looked at point in time employment numbers to drive their policy thinking. It was clear the job market was already overheated at 5% unemployment, for example, due to the historical number of job openings and increasing pace of those job openings, plus record high quits rate. Plus retail sales/inflation.
- dragonwriter 5y ago
  > In a lot of ways, the feds hands are tied by the political dysfunction in our political branches It's not so much that the Fed’s “hands are tied” preventing them from monetary policy they should, as a central bank, take. Rather, Congress just isn't taking fiscal policy actions that they, as the government outside of the central bank, should take, and (in some cases, especially on the Right) blaming the Fed for for their own nonfeasance.
p_j_w 5y ago
>And when the Fed went to course correct in 2018, they immediately bailed after markets started to decline to historically normal levels. I suspect Jerome Powell will be looked back on as a disaster. That Biden renominated him out of deference to the political norms that were broken to get him in place is a massive black mark on his record.
dragonwriter 5y ago
> And when the Fed went to course correct in 2018, they immediately bailed after markets started to decline to historically normal levels. “Markets” you are discussing aren't part of the Fed dual (actually, triple) mandate, and are of only intermediate, instrumental relevance. > Fiscal policy should be used to address economic gaps, Yeah, but Congress has been basically asleep at the switch on fiscal policy for a long time, and to the effect their failures effect the things that are part of the Fed mandate, it is legally the Fed’s job to act via monetary policy, whether or not fiscal rather than monetary policy is the better choice.
- adam_arthur 5y ago
  I'm very familiar with the Fed and their mandates. To say they don't consider asset prices is simply wrong judging by history. If they didn't care about markets, they would have ended QE abruptly, and started raising rates months ago. They only avoided doing this to prevent a market selloff. Every rational thinking person thinks it's absurd for them to be buying MBS when housing is appreciating at record levels amid an inflationary environment. They spend a lot of time talking about market expectations, market levels in their notes. They also have a price stability mandate that they've ignored for over a year.
  - dragonwriter 5y ago
    > To say they don't consider asset prices I didn't say that, though. I contextualized the role of those prices as intermediate and instrumental rather than ultimate goals (and, as such, they are targeted for what, in consideration of other circumstances, they appear to indicate about the things that are mandate goals.)
    - adam_arthur 5y ago
      Clearly correcting the market would help resolve inflationary pressures, while not seriously dampening the jobs market. So if your supposition is correct, they should engineer a decline in the market and real estate to achieve their price stability mandate. Yet everything they do is dragging their feet to support asset prices. So I agree with your assessment in theory, but don't see them living or acting by that logic. They could have ended QE overnight in January, for example. Why not? They continue to pursue low volatility when the times of today warrant higher volatility and less risk taking/speculation.