becky beckwetter and his formula for a dud
"lowering the IOER and adopting a NGDP level target"
just why and how will these moves
---one a voodoo move to boot ! ---
".. incentivize the private production of safe assets"
that will either ".. spark "
"a robust recovery in aggregate demand"
or follow from "a robust recovery in aggregate demand"
lowering the IOER i suspect will lead to no signifigant increase in credit driven spending
and " adopting a NGDP level target "
couldn't "incentivize " anybody to spend anything
let alone
incentivize "the private production of safe assets "
becky's scenario is all hand waves that assume what needs to be demonstrated
"Such an announcement, if credible, would send a loud signal to markets of more monetary stimulus."
" And if done right, this signal would have a huge impact because lowering the IOER is tantamount to saying the Fed is going to permanently increase the monetary base. "
what ?
what can be lowered can also be lifted back up
"A permanent increase in the monetary base implies a permanently higher price level and permanently higher NGDP level down the road."
quantity theory in its most banal form
down the road indeed
"... lowering the IOER would permanently raise expectations of future nominal spending and income."
how ? and why ?
note the bad conscience peeping out thru the qualifying word
"permanently "
now
recall the fudge caveat "if credible"
which combined sez
if it's believed to be permanent
" demand for financial intermediation services would increase today"
" as firms, households, and governments planned for the higher level of NGDP."
talk about model bound nonsense
this reified wonder weapon
expected future nominal gdp
my response
even if its believed
show me
the serious first mover profit bonus here
if there's no big near certain opportunity loss
to wait and see ....
yup
in effect
careful corporate players
would " call "
the fed to show some cards
or at least watch to see if opther outfits jump
as most choose to watch ..no one much jumps
puff ....
busting the fed's play ...no ?
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the rest hangs in the air after this :
" increased demand for credit would raise financial firms' net interest margins"
ya if .... if corporate demand for credit increases
what if the necessary motive isn't there
to borrow more ?
likewise wh issue debt why roduce
more private sourced safe assets
yet another sky hooked outcome
households up borrowings ?
this requires non credit strapped households
to decide based on fed signals
to buy now while bargains remain on the table
i submit
most households with credit don't think like that
study all these clowns crying hyper inflation
they buy gold not cars and washing machines
the rest?
prolly wouldn't react even if the media began crying
in unison
" inflation is coming inflation is coming
run to the mall NOW
while these low low
never to be seen again prices last !!!!"
nope
the households are looking at their job prospects
specifically their pay prospects
how are expectations about these immediately lifted
by the fed reducing IOER ?
and twith the other assumed linked in actions a no go too
indirectly pushed up household spending comes a cropper too..
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"Now I do think that the signal from lowering the IOER would be even more effective if it were done in conjunction with the announcement of a NGDP level target."
this announcement reminds me of lyndon laroches announcement a ways back
if elected president he'd put women on mars
"..a destination point for nominal spending and nominal income that would better focus the public's expectations"
not if "the whens " are deemed to be blotto
in other words
not if the ngdp levels aren't widely expected
to be hit ....pretty much on announced schedule
where's the credible when ?
show me the when
cutting IOER to zero ...no actually moving it below zero
penalizing free reserves prolly won't improve the belief in an announced when
