"Start with what we thought about fiscal policy back in 2007. Back then, there was near-consensus agreement with John Taylor’s (2000) position that fiscal policy should be set on classical cost-benefit terms, with aggregate demand management the exclusive or the near-exclusive province of central banks. "

Pugsley speaking

Uncle Marty speaks: Directed lending to the government by captive domestic audiences (such as pension funds or domestic banks), explicit or implicit caps on interest rates, regulation of cross-border capital movements... public ownership of some of the banks or through heavy “moral suasion”... high reserve requirements (or liquidity requirements), securities transaction taxes, prohibition of gold... placement of significant amounts of government debt that is nonmarketable. In principle, “macroprudential regulation” need not be the same as financial repression, but in practice, one can often be a prelude to the other..."

Naughty macro

Most countries have automatic rules in their tax-and-transfer systems that are partly intended to stabilize economic fluctuations. This paper measures how effective they are. We put forward a model that merges the standard incomplete-markets model of consumption and inequality with the new Keynesian model of nominal rigidities and business cycles, and that includes most of the main potential stabilizers in the U.S. data, as well as the theoretical channels by which they may work. We find that the conventional argument that stabilizing disposable income will stabilize aggregate demand plays a negligible role on the effectiveness of the stabilizers, whereas tax-and-transfer programs that affect inequality and social insurance can have a large effect on aggregate volatility. However, as currently designed, the set of stabilizers in place in the United States has barely had any effect on volatility. According to our model, expanding safety-net programs, like food stamps, has the largest potential to enhance the effectiveness of the stabilizers.

Yup

Off set sourcing for added retirement fund inflows

Cut out the various subsidized savings programs Increase payments by captured revenues Estimates 150-200 billion per annum

trickle down monetarism

using the portfolio crowd as your vehicle to drive spending is folly of course


the Sumner crew will get gun downed in time
once more focus on distribution of injections
between transfer pay out rates
tax cuts

and these evil portfolio goosings

open shots by simon simple lewis an PK recently

from wage rate repression to interest rate repression

reversing the class in power
 could mean something as simple as that

pent up real wage cuts at the zero raise bound

change real interest rate

to the change in the real wage rate . Now imagine a reduction in wages with an off setting increase in eitc

we are now at the"zero raise" barrier but we could bust thru and restore full E ...if we could maintain nominal income thru a fully compensating uncle injected subsidy stream

krugman steps on his own monetary macro recovery path

"This does say that there is little risk of accelerating inflation. Indeed, ...
 there’s a “pent-up demand for wage cuts” that will probably push inflation lower even if the economy is recovering "

Central banks and other policy makers will be making a terrible mistake if they look at low, stable inflation and pat themselves on the back for a job well done. Low, stable inflation, it turns out, is entirely consistent with catastrophic economic mismanagement"
translate this


even if wealth rises thru QE and inflation increases ..it will be retarded by a nominal wage anchor

we need a wage boom led recovery to reach  optimal speeds

that means uncle cuts payroll taxes increases EITC"  pays some health  premiums"
etc
  and makes transfer payments not loans

wag stag as the head wind buffeting the product price inflation band wagon.......accelerating

to shrink real debt we nee a blast of high producft price inflation

but what is nominal wages drag an anchor ?

toward a deeply protractedly submerged rate structure

wil there by a volcker moment to give NGDPLP targeting street cred

volcker demonstrated the FED would really strangle credit .really really
unlike Burns-Miller
yup stare at soaring lay offs
and ....keep on throttling

will this BOJ guy do liewise for de facto krugman-Woodford  targeting
ie huge financial repression

back to the flying 40's

NGDP LEVEL TARGETING : KRUGMAN IN A CLOWN COSTUME

no not a sheep suit for a wolf

why not?


look at the prior post here



the real key
serious financial repression

ie protracted sub zero real rate structures

PK outlines the monetary cyclops model ....notes follw occasionally

" I’ve made it clear that I very much approve of Japan’s new monetary aggressiveness. But I gather that some readers are confused – haven’t I been arguing that monetary policy is ineffective in a liquidity trap? The brief answer is that current policy is ineffective, but that you can still get traction if you can change investors’ beliefs about expected future monetary policy – which was the moral of my original Japan paper, lo these 15 years ago. But I thought it might be worthwhile to go over this again.
So, at this point America and Japan (and core Europe) are all in liquidity traps: private demand is so weak that even at a zero short-term interest rate spending falls far short of what would be needed for full employment. And interest rates can’t go below zero (except trivially for very short periods), because investors always have the option of simply holding cash. Incidentally, this isn’t just a hypothetical: there has been a surge in currency holding, although a lot of it is $100 bills held overseas:

Under these circumstances, normal monetary policy, which takes the form of open-market operations in which the central bank buys short-term debt with money it creates out of thin air, have no effect. Why?
Well, the reason open-market operations usually work is that people are making a tradeoff between yield and liquidity – they hold money, which offers no interest, for the liquidity but limit their holdings because they pay a price in lost earnings. So if the central bank puts more money out there, people are holding more than they want, try to offload it, and drive rates down in the process.
But if rates are zero, there is no cost to liquidity, and people are basically saturated with it; at the margin, they’re holding money simply as a store of value, essentially equivalent to short-term debt. And a central bank operation that swaps money for debt basically changes nothing. Ordinary monetary policy is ineffective.
(Some readers may wonder about purchases of long-term debt, which doesn’t have a zero rate. That will have to be a subject for another post; but it makes little if any difference).
The flip side of this, by the way, is that all those fears about how “printing money” in this slump would lead to runaway inflation were predictably wrong. If you paid attention to the Japanese story from the last decade, you knew that simply expanding the central bank’s balance sheet did little, and certainly wasn’t inflationary:

Here’s the thing, however: the economy won’t always be in a liquidity trap, or at least it might not always be there. And while investors shouldn’t care about what the central bank does now, they should care about what it will do in the future. If investors believe that the central bank will keep the pedal to the metal even as the economy begins to recover, this will imply higher inflation than if it hikes rates at the first hint of good news – and higher expected inflation means a lower real interest rate, and therefore a stronger economy.
So the central bank can still get traction if it can change expectations about future policy.
The trouble is that central bankers have a credibility problem – one that’s the opposite of the traditional concern that they might print too much money. Instead, the concern is that at the first sign of good news they’ll revert to type, snatching away the punch bowl. You can see in the figure above that the Bank of Japan did just that in the 2000s.
The hope now is that things have changed enough at the Bank of Japan that this time it can, as I put it all those years ago, “credibly promise to be irresponsible”.
And that’s why I’m bullish on the Japanese experiment, even though current monetary policy has little effect."

----------------------------------------






"When I say that the rate is too high, I mean relative to the rate that would produce full employment, which is, as Brad reminds us, Wicksell’s “natural rate”. (Since Wicksell wrote in 1890, this isn’t your grandmother’s liquidity trap, it’s your great-great-grandmother’s liquidity trap!)"

yes wage change warrants are needed too

of course price change warrants are logically prior
and the two can obviously work
for or against
 either of the tno   " great  modern marxian classes"
---wage earners ,capitalist (enterprisers and/or  rentiers)---
....either ...not both at once of course
this is zero sum shit in form

the key is the two ended system

both floor and ceiling are one

we have moved some distance from Abba
but we are now back to his first impluse
aggregate wage  change regulation

Financial repression is cool again ...once almost forgotten now it's the smart ass solution

sumner sez real shocks don't determine the busines cycle ...ya but institutionally detarmined endogenous convulsions do

perfect credit and payment markets undergird an array of possible maximally expanding infinite horizon spending and output paths

simple sumner "if NGDP had started growing again at 5% in mid-2009, we’d be mostly out of the recession by now. "

the longest Sumner

"most US business cycles are a pretty simple phenomenon. Because of excessively tight money, NGDP growth slows relative to what was expected when labor contracts were signed. Because hourly nominal wage growth is very slow to adjust, a sharp slowdown in NGDP growth raises the ratio of W/NGDP, which leads to fewer hours worked and less output. It may take many years for the labor market to fully adjust. (Note: if NGDP had started growing again at 5% in mid-2009, we’d be mostly out of the recession by now. The recovery was slowed by further unexpected (negative) NGDP growth shocks after 2009.)
Think of recessions in terms of the game of musical chairs. When the music stops several chairs are removed, and a few participants in the game end up sitting on the floor. Slow NGDP growth combined with sticky wages is like taking away a few chairs; several unemployed workers end up “sitting on the floor” (i.e. unemployed), as there is not enough aggregate nominal income to support full employment at the existing nominal hourly wage level.
Other variables such as interest rates also move around over the business cycle, but don’t really play a causal role in unemployment. It’s all about NGDP and hourly wage growth."

are there well inntended pro job class elements among the market monetarists ?

if so

they need to stop selling the new target

NGDP path is fine
as targets go
it has a built in accelertion expectation
if the CB can actually drive NGDP in the mid term

but can it ?

obviously
what counts is the monetary policy
that gets these NGDP level pathers
      back on their path and ...fast !

i've seen it  suggested
 the FED had the latent ability
to accelerate  real out put by over 2%
in 2008 !


i remain sceptical the FED could even accelerate product inflation by an extra 2%!

as i suspect most macronomists remain sceptical

market monetarists
show us the how


if as i suspect  you rely  on expectations voodoo
to do the heavy lifting

the scepticism will remain

btw

i see the keen aspect of a nominal out put path as CB target

indeed it finesses the bug a boo of accelerating inflation overtly

but to sugggest most of the difference will be " real " is bally hoo

high priest scott sumner is of course obviously
in the enemy class kamp

if as a market monetarist you aren't
if you see this new targeting paradigm
 as a better mouse trap
---even though it relies on asset management
ie uncle intervening to restore asset market values --

yup
relift capitalist paper
that just tanked

why ?

why prfer to spur deficient  spending
 by "re-engrossing"  big  asset holders ?

why high light
pure pigou wealth effect jingo ?

why are you not uncomfortable with your cult  leaders ?

you well intendeds
 may want a revived job market as much as i might

but you  are playing with anti job class agitators here

really little better then greg mankiw


salvation thru government aggregate
" wealth insurance " ?

give me a break !

survival of the fewist

the law of economic oligarchy

old oligarchs need to thin out their ranks and refresh the elite with open slots
occasionally

purge the club