3 ms·

I still want to nitpick on 'perpetual'. Not in any conceivable usage, but in the context of that post. "Few seem to want to hear it, but the housing 'recovery'

I still want to nitpick on 'perpetual'. Not in any conceivable usage, but in the context of that post. "Few seem to want to hear it, but the housing 'recovery' is based strictly on a Fed that provides perpetual QE to hold down interest rates forever. ..." That's a much stronger statement than saying it's open-ended. Maybe I should have let it slide as a little hyperbole, however I disagree with overall thrust of the comment. Plus, the Fed's current policy is only open-ended in the sense that the recovery is not guaranteed because nothing is guaranteed. On our current trajectory it's not looking too bad. A lot slower than we'd like, but there is progress. I do not think it is unreasonable to expect the recovery to be complete to the Fed's satisfaction (with respect to their QE promise) in three or four years. (I'm not saying we'll have unemployment, for example, where it was in 2007 anytime that soon). If you add on a further period of QE to let them meet the commitment they have made, then I grant that is a long time but it is not forever. "Policy parameters = f('hope') is not what they get paid for, or why they are entrusted with power. " I was being a little flowery with 'hope', is all. They do have to act on what they believe are the facts and what they believe will happen, whether or not I call it 'hope'. However, what the Fed is supposed to do is look after inflation and unemployment. They've been very assiduous about the former while neglecting the latter for some time now and are finally allowing the idea that inflation could go a little higher than 2%.

001sky 14y ago
In the spirit of fair play, I'll accept that both positions were literally not true. Still, there is a thesis/antithesis/sythethis that is worth spelling out for HN'ers folowing along. Infinite QE = False Determinant QE = False _________ Open-ended QE =~ True Wait, wat, why? The reason: The only way the Fed gets to where it wants is with (at a minimum) a credible threat of perpetual QE. The fed is trying to play the house at a casino. It does not want a high-roller doubling down all-in on Black at infinite repitition. That game goes to whoever lasts the longest at the table. The threat of perpetual QE needs to be credible to keep this type of speculation off the table. Only when it is clear that this has gone (ie, such bets are irrational on fundamentals) will it change its position. So, in that sense, we should expect to see a reversion in policy that will make QE finite. But that is different than saying that bets should be placed in as if we were in an environment of (tractably) finite QE (that would be bad advice--per above). So to get to the state-space where your notion is true, you have to go through the state-space where the notion you dis-agree with is true. But these are sequential, and the time that you are correct is iff and after the time that the other notion is correct first. And we are in that latter state-space now. So housing prices are being supported by QE; QE is open-ended for the forseable future; At some stage this will revert but the half-life on a 30 year mortage is 15 yrs and we will have at least 8 years of QE so at least some (half or likely more) of the value of the housing market is (arguably but) correctely attributed to QE. I think this is a fair/useful elucidation, but YMMV.
- aptwebapps 14y ago
  That's a pretty fair description and I hate to disagree with it but I have to, a little. ;) Yes, they need a credible threat, but the threat is merely that they'll continue with this policy a little past the inflection point instead of right up to it. And, at least to me, the inflection point doesn't seem all that far off. I think 8 years is a better upper bound than a lower one.

001sky 14y ago

In the spirit of fair play, I'll accept that both positions were literally not true. Still, there is a thesis/antithesis/sythethis that is worth spelling out for HN'ers folowing along. Infinite QE = False Determinant QE = False _________ Open-ended QE =~ True Wait, wat, why? The reason: The only way the Fed gets to where it wants is with (at a minimum) a credible threat of perpetual QE. The fed is trying to play the house at a casino. It does not want a high-roller doubling down all-in on Black at infinite repitition. That game goes to whoever lasts the longest at the table. The threat of perpetual QE needs to be credible to keep this type of speculation off the table. Only when it is clear that this has gone (ie, such bets are irrational on fundamentals) will it change its position. So, in that sense, we should expect to see a reversion in policy that will make QE finite. But that is different than saying that bets should be placed in as if we were in an environment of (tractably) finite QE (that would be bad advice--per above). So to get to the state-space where your notion is true, you have to go through the state-space where the notion you dis-agree with is true. But these are sequential, and the time that you are correct is iff and after the time that the other notion is correct first. And we are in that latter state-space now. So housing prices are being supported by QE; QE is open-ended for the forseable future; At some stage this will revert but the half-life on a 30 year mortage is 15 yrs and we will have at least 8 years of QE so at least some (half or likely more) of the value of the housing market is (arguably but) correctely attributed to QE. I think this is a fair/useful elucidation, but YMMV.

aptwebapps 14y ago
That's a pretty fair description and I hate to disagree with it but I have to, a little. ;) Yes, they need a credible threat, but the threat is merely that they'll continue with this policy a little past the inflection point instead of right up to it. And, at least to me, the inflection point doesn't seem all that far off. I think 8 years is a better upper bound than a lower one.