look at all of ...us economic northerners caught in jobbler status

notice the rest of the pack say in the early to mid 90's versus now

the euros ??
italy germany france england  all better off now

japan ??

well no not better off now  worse off in fact  but not worse then  in the early 2000's

canada ??

no contest look at the early 90's !!!!

is this   jobs market depression  as bad as then ...for our top economic north  partners ??

in a time of expected long term negative real rates

a newly issued  zero coupon TIPS
 would sell at a premium above face value

too bad we're no there yet


then look at this


"The Treasury could save that money by buying back TIPS, entering into inflation swaps, and issuing Treasury bonds with the same maturity instead.
Treasury Inflation-Protected Securities (TIPS) are obligations issued by the U.S. Treasury, similar in most respects to Treasury bonds except that the principal amount of a TIPS issue is inflation-indexed -- that is, it is adjusted over time to reflect changes in the consumer price index. The Treasury began issuing TIPS in 1997.
With a type of arbitrage strategy, investors can convert the inflation-linked cash flows from a TIPS issue into fixed cash flows using inflation swaps. The resulting cash flows can then be structured to match the cash flows from a Treasury bond with the same maturity date as the TIPS issue, which results in straight-forward arbitrage profit opportunities that are greater than the costs of the transaction.
In Why Does the Treasury Issue TIPS? The TIPS-Treasury Bond Puzzle (NBER Working Paper No. 16358), authors Matthias Fleckenstein, Francis Longstaff, and Hanno Lustig show that the price of a Treasury bond and an inflation-swapped TIPS issue that exactly replicates the cash flows of the Treasury bond can differ by more than $20 (per $100 notional), with Treasury bonds almost always overvalued relative to TIPS. The total differential, they estimate, has exceeded $56 billion, or nearly 8 percent of the total amount of TIPS outstanding.
This mismatch in TIPS–Treasury pricing is strongly related to supply factors, such as Treasury debt issuance and the availability of collateral in the financial markets, and is correlated with other types of fixed-income arbitrages. However, this study raises the issue of why the Treasury issues TIPS, since in so doing it both gives up a valuable fiscal hedging option and leaves large amounts of money on the table. The authors contend that the Treasury could save that money by buying back TIPS, entering into inflation swaps, and issuing Treasury bonds with the same maturity instead.
The analysis here is based on a review of daily prices for 29 matched-maturity pairs of TIPS issues and Treasury bonds for the 64-month period from July 2004 to November 2009. "

-- Frank Byrt (NBER)



what are TIPS price moves telling us now about inflation expectations ???


well  TIPS price moves are contaminated by other rate change risks

for us macronauts decent micro foundations DO NOT maybe can not ..EXIST

so stick with what works

shlock of the walk lernerite vickreyized  keynes-kalecki ism
we got the cybernetical gimmick called
 interim results feed  back

i think of this every time i think about driving a car
powered by a  complex mechanism
  i can  no more explain in any detail
then a  mountain goriilla can differentiate  an algebraic expression
and a car motor  isn't even aperiodic
like a  robust market system
one might want to macro drive

but shit i can drive my little  korean fuckerof a car  anywhere i want

so too can we take the us economy
  errr ...with a few more wheels brakes and accelerators

health services as new market paradigm

quote of a quote by pk of some  randomly correct miteful  by some geefster at the britful  abominist :

"key thing to pay attention to is who this marketing campaign was targeted at: key decisionmakers at providers and insurance companies. Those are the people who decide whether medical procedures get ordered. It’s not patients. Patients aren’t going to experience a loss of freedom or satisfaction because an expert reviewer at the Independant Payment Advisory Board makes the call as to whether a procedure is medically beneficial, rather than the corresponding bureaucrat at their insurance provider or at the for-profit clinic they’re attending"

gets paul to this :

http://www.aeaweb.org/aer/top20/53.5.941-973.pdf
that's arrow's now classic analytics of an ... exceptional market : health services

pre dating akerloff's   not so exceptional   used car market model
and apres that ??...  the  eclectic deluge

which gets me to this:


the culminating  greenwald stigiltz theorem ( GST )

revisited here by dixit:
http://www.princeton.edu/~dixitak/home/StiglitzFest_Dixit.pdf

"Among the hundreds of papers Joe has written on information economics, the one

with Greenwald (1986) surely ranks near the top. It establishes a conceptual parallel

between asymmetric information and technological externalities, and shows that a

competitive equilibrium of an economy with asymmetric information is generically not

even constrained Pareto efficient ...
                                                              but  !!!!!!!
A government facing the same information constraints as the private individuals in the economy
can nevertheless find Pareto-improving policy interventions."
-dixit-



what was it about trading beaver pelts for deer meat that seemed so univerisal
neoclassics  made all markets  structurally identical  ...errrr  except for the exceptions ???

or fresh fish at dock side ???

or gold on an exchange .... ...oops !!!! calling doctor mallinvaud !!!!

adverse currents
dancing frolicing asymmetries
 market self immolation
  unnatural  sellection pressures
survival of the credit worthy or at  least  credit connected

product markets plus or minus free range  ad blitzing


all this
hardly  proving universal  or even near universal reign of markets as optimal


and after  the coming of the GST  in the mid 80's
yes all that long ago now

 why  not more shouts of

"no mercatian "dike "
no  mercodicy
    for you... mr plutonic"

from the windows of the ivory tower ???



maybe we wild childs
 of the post neoclassic  post eclectic  dispensation
 need to remove the walrasian  homoginization process
once and for all  ....eh

past master of  leon's  dairy ken arrow himself
 drank straight from raw markets

once more for the road:

the GST
"shows that a competitive equilibrium of an economy with asymmetric information
   is  GENERICALLY NOT EVEN PARETO OPTIMAL " !!!!!!

rusty ...if that were true

pigs could fly

u guys are like a troop of chimps
watching a ball game

what if ....

push rates into the negative range ie a tax on holding  prior debt obligations

what would the  bond price curve look like ??


i got the up stroke  on the positive side ending in a singularity at zero
but once in the negative range .....??

is it really no price ...only entrapment ???

what happens to corporates ?? chapter 23 of the tales of the rate fetish macronauts

when theres a flight to treasuries the initial effect is to raise corporate rates and lower treasury rates
if the fed steps in and reduces the treasury rates  even lower
does it have enough above zero rate room to lower the corporate default risk premium enough to counter
both
the default risk premium increase

and

the knock on effect to the inflation premium
 from the fed's monetary base increasing  safe rate reducing  reaction

just fooling around here of course

but the entire array of security rates  on n private and m public issues plus f  forex rates and  e equity p/e ratios
makes for quite a bundle to aggregate into one hicksian rate eh ??


in fact there's prolly no rate of real return  feasible in our system
even if we went to negative nominal rates that could induce corporaions the build new capacity or hire additional staff

lets call this formal I(r) the hicks effect
ie that so llong as we can push the real rate r low enough
we can induce all  the I we need

that's like the venerable old escape hatch
called the pigou effect
if product prices fall  low enough
 the purchasing power of money  ie the real balances  will rise high enough to  induce
as much more consumption as we need
a particularly absurd  sub set of the wealth effect