Parrot modeling

Model Imitation of market dynamics: The collection of bare data streams From a few selected metrics from an economy Similarly " generated " by a mechanism. http://www.newyorkfed.org/research/staff_reports/sr618.pdf

Rogoff invoked the non linear rate response path

Street name: The sudden spike And where is the fed in all this Kenny ? The image of an overwhelmed CB is a joke The CB runs it's own currency market if and when it chooses to Whatrevents the fed from buying up entire issues Err Other then the fed itself The only think we have to fear is the fed itself !

Fiscal injections scotched by fed

Yes the fed can constrict Net credit flows To counter fiscal thrust funded with borrowed money But how can you set up a test of pure fiscal activism ? What is the neutral policy the fed must take ? The hicks model tells us nothing if the fiscal borrowing doesn't move the nominal rate off the floor Or even if it does but that change leaves corporate and household spending " unimpacted" And the dollar doesn't strengthen or export buyers spending is " unaffected" by the forex change

How does Aggregate "supply constraint " reduce system wide dynamic efficiency improvements ?

Maybe I don't get it ... You still have opportunity to increase your gain By innovation process or product or re purposing or switching sectors Even if now you operate entirely in the black Maybe reducing the power of the credit system to guide over all investment flows from the commanding heights Increases co ordination If the system is set to operate in aggregate in the red Survival in aggregate requires credit infusions

forex trade balance interaction

Source: Bureau of Economic Analysis and the Federal Reserve Board

CEPR.net

PK narrates the spiraling 70's and lo and behold no colander MAP no pigou inflation tax

when the spiral of output prices driven by wages chasing COL
 and profits maintaining margins ..got insufferable

the answer to "the spiral" was at hand
weintraub or lerner :

a pigou tax or a warrant market

but
instead we got Volcker


"In elite mythology, the origins of the crisis of the 70s, like the supposed origins of our current crisis, lay in excess: too much debt, too much coddling of those slovenly proles via a strong welfare state. The suffering of 1979-82 was necessary payback."


"None of that is remotely true."

well that's a relief eh comrades!


"There was no deficit problem: government debt was low and stable or falling as a share of GDP during the 70s. "

"Rising welfare rolls may have been a big political problem, but a runaway welfare state more broadly just wasn’t an issue — hey, these days right-wingers complaining about a nation of takers tend to use the low-dependency 70s as a baseline. "

okay nouigh spoonheading :

"What we did have was a wage-price spiral:"

" workers demanding large wage increases (those were the days when workers actually could make demands) because they expected lots of inflation, firms raising prices because of rising costs, all exacerbated by big oil shocks. It was mainly a case of self-fulfilling expectations"

" the problem was to break the cycle."


"So why did we need a terrible recession? "

"...simply as a way to cool the action. "

"Someone — I’m pretty sure it was Martin Baily — described the inflation problem as being like what happens when everyone at a football game stands up to see the action better, and the result is that everyone is uncomfortable but nobody actually gets a better view."

come the double camel clutch submission hold
aka:  the  volckerdammerung

," stopping the game until everyone was seated again."

"this timeout destroyed millions of jobs and wasted trillions of dollars."


"Was there a better way? "


"Ideally, we should have been able to get all the relevant parties in a room and say, look, this inflation has to stop; you workers, reduce your wage demands, you businesses, cancel your price increases, and for our part, we agree to stop printing money so the whole thing is over. That way, you’d get price stability without the recession. "

" America wasn’t like that, and the decision was made to do it the hard, brutal way."

" This was not a policy triumph! It was, in a way, a confession of despair."


.

"60-year-old men should remember that a decade after the Volcker disinflation we were still very much in a national funk"

a nice graph;corporate profits ...the last ten years...