EJ Appreciation Thread

[sishya]

Re: EJ Appreciation Thread

EJ is the best, keeps me grounded. He nevers goes hyperbole. I am fortunate to have found iTulip 5 years ago. I always tout iTulip and it's track record to my friends.

[EJ]

Re: EJ Appreciation Thread

EJ,

Looks like they are gearing up for a soon to be QE3. But in what form? How will they do it this time? Private assets like corp bonds, commercial paper? Will it be another swap of the printing press $$ similar to Euorpe's LTRO's? Somehow, I think the banks will be allowed to purge their balance sheets even more of horrible assets (liabilities).

Did the gold, dollar and (all) commodity markets on friday signal the fix is in?


Your thoughts are always appreciated.

Thanks.

One of the things I appreciated about talking to her versus Bernanke is that she doesn't look like she's about to jump out of her skin at any moment the way Bernanke does. She comfortable at the podium, on the record in front of the press and taking questions. When Bernanke spoke to our group (Boston Economics Club) in November, he did not take questions. She took questions for an hour and gave detailed responses. Her response to my question went on for close to five minutes. It's a tough crowd, too, including heavy hitter conservative economists who challenged the Fed's latest meme campaign on the threat of a "fiscal cliff." I asked her if the aftermath of the credit bubble hadn't caused the economy economy to become dependent on monetary policy and fiscal policy simply to stay out of recession, that without them the economy will fall right back into recession again. I noted the fact that public credit had expanded to fill the gap left by declining private credit expansion since 2008, the first extended period of consumer credit outstanding on record, and whether reliance of fiscal policy to compensate will eventually become counterproductive if buyers for new Treasury issuance become harder to find and interest rates rise. I'll explain her response later. She raised the ante by claiming that the CBO projects that if all of the fiscally related legislation that is due to expire at the end of 2012 is allowed to that the impact on GDP is 4%. In other words, if Congress doesn't extend the Bush tax cuts, unemployment insurance, and so on, that the economy will go into recession in 2013! How's that for throwing down the gauntlet. Clearly the Fed does not want to be left holding the bag to provide additional stimulus because Congress, for political reasons, won't do it. The Fed wants QE3 in reserve in case Europe falls apart. I'll go into this in detail in the subscriber area later today.

[ST]

Re: EJ Appreciation Thread

text of her speech:

http://www.federalreserve.gov/newsev...n20120606a.htm

[ST]

Re: EJ Appreciation Thread

the Fed's latest meme campaign on the threat of a "fiscal cliff."

But that campaign is right on the money according your work and Koo's work. Both, gov't stimulus and QE are required, even if they inch us towards a bond/dollar crisis, correct? They have learned from Koizumi and Hashimoto's mistakes, correct?

[EJ]

Re: EJ Appreciation Thread

But that campaign is right on the money according your work and Koo's work. Both, gov't stimulus and QE are required, even if they inch us towards a bond/dollar crisis, correct? They have learned from Koizumi and Hashimoto's mistakes, correct?

Absolutely. I'll address this later today.

[c1ue]

Re: EJ Appreciation Thread

But that campaign is right on the money according your work and Koo's work. Both, gov't stimulus and QE are required, even if they inch us towards a bond/dollar crisis, correct? They have learned from Koizumi and Hashimoto's mistakes, correct?

My take is that recognizing a problem doesn't equate to recognizing the right solution.

My view is more like the Fed and government are looking at this fiscal cliff in this manner:

You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before.

[lektrode]

Re: EJ Appreciation Thread

My take is that recognizing a problem doesn't equate to recognizing the right solution.

My view is more like the Fed and government are looking at this fiscal cliff in this manner:

You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before.

+1
yeah, like buy the votes of the auto/state/municipal unions on a scale not seen since the 1930's, along with filling the coffers of ones best constituents... uhhh...
i mean campaign contributors

and nobody does the ole quid pro quo shuffle like the CHItowne mob

[necron99]

Re: EJ Appreciation Thread

Hear hear! I enjoy a lot of diverse discussions among the online community here, without a doubt. But -- no offense to everyone who isn't EJ -- what really keeps me checking the site over and over through the course of the week is, "I wonder if EJ has posted something new" ??

[EJ]

Re: EJ Appreciation Thread

My take is that recognizing a problem doesn't equate to recognizing the right solution.

My view is more like the Fed and government are looking at this fiscal cliff in this manner:

Not this time. Talking to her one on one after the meeting, I pointed out that if she's right and the end of fiscal stimulus produces a recession in 2013, it will be the first time since 1938 that the US has been in recession before the output gap closed from a previous recession. Her body language was her answer, that and her invocation of the term "self-reinforcing deflation spiral" and the difficultly of exiting from one, but of course adding the point that the Fed has all of the "tools" needed to prevent the economy from entering a deflation spiral. The Fed sees the economy as on a knife-edge toward either deflation or, interestingly, a surprising rise in yields if growth turns out to be faster than expected, with Congress fumbling toward the abyss and Europe looming as a potential external trigger.

[c1ue]

Re: EJ Appreciation Thread

Not this time. Talking to her one on one after the meeting, I pointed out that if she's right and the end of fiscal stimulus produces a recession in 2013, it will be the first time since 1938 that the US has been in recession before the output gap closed from a previous recession. Her body language was her answer, that and her invocation of the term "self-reinforcing deflation spiral" and the difficultly of editing from one, but of course adding the point that the Fed has all of the "tools" needed to prevent the economy from entering a deflation spiral. The Fed sees the economy as on a knife-edge toward either deflation or, interestingly, a surprising rise in yields if growth turns out to be faster than expected, with Congress fumbling toward the abyss and Europe looming as a potential external trigger.

Thank you for the follow up.

I guess I'll have to wait for the subscriber section commentary to filter out.

I don't quite understand what you're saying above - that the Fed does recognize the problem this time and/or the Fed will act correctly? From other comments, it seems the answer is no.

My commentary was more in reference to the overall situation: Yellen may be talking about the fiscal cliff, but the Federal Reserve isn't the entity that needs to act to fix many of the problems the US economy has. Certainly more Fed QE could be used in lieu of actual problem fixing - and has been for several years now - but I am 100% certain the politicians will use the fiscal cliff to further their own agendas.

It is true that Yellen as a Fed Chair would be in a theoretical position to rein in banksterism via actual use of its regulatory powers, but I do find it notable that nothing whatsoever was apparently spoken on the subject of regulation, SDIs, and so forth. Thus it seems extremely unlikely that even this moldy, disused portion of the Fed's charter would be employed.

[EJ]

Re: EJ Appreciation Thread

Thank you for the follow up.

I guess I'll have to wait for the subscriber section commentary to filter out.

I don't quite understand what you're saying above - that the Fed does recognize the problem this time and/or the Fed will act correctly? From other comments, it seems the answer is no.

The party line is that Congress needs to get its fiscal house in order -- but not now! That exercise needs to be put off until later date, in a mythical future era of robust economic growth that we are somehow supposed to arrive at to close the output gap sans measures to write off credit bubble era debt, or a new asset bubble like the one that got the Fed out of its post stock market bubble crash predicament. The message is fiscal accommodation short term, fiscal restraint long term. Of course that's always the message and has been for decades, yet it has only once been realized when windfall capital gains tax revenues from the stock market bubble produced a temporary budget surplus in the year 2000.

My commentary was more in reference to the overall situation: Yellen may be talking about the fiscal cliff, but the Federal Reserve isn't the entity that needs to act to fix many of the problems the US economy has. Certainly more Fed QE could be used in lieu of actual problem fixing - and has been for several years now - but I am 100% certain the politicians will use the fiscal cliff to further their own agendas.

The Fed is the FIRE department, if you will, there to put out the fires in the financial markets that flare up because the Fed and other regulators have failed in their duty to reign in FIRE Economy political interests. Congress is supposed to be managing the structural issues, but of course since it is FIRE Economy friendly, they never get addressed.

It is true that Yellen as a Fed Chair would be in a theoretical position to rein in banksterism via actual use of its regulatory powers, but I do find it notable that nothing whatsoever was apparently spoken on the subject of regulation, SDIs, and so forth. Thus it seems extremely unlikely that even this moldy, disused portion of the Fed's charter would be employed.

In the Q&A session I heard from her the first admission I've ever heard by a standing Fed official that the economy is over-leveraged. She also said that financial reforms were in early stages, Frank Dodd was "a nice start" and that the agenda for reform wasn't done yet, never mind implementation of reforms. I got the impression that if she found herself in the chairman's role she'd knock a few heads together. Who better to do it than someone with her credentials who looks like your grandmother.

That's all I'm going to say here.

[subtly]

Re: EJ Appreciation Thread

Others have said it better than I can, so I'll just say: thanks, Eric. iTulip is my only daily must-see website.

[c1ue]

Re: EJ Appreciation Thread

In the Q&A session I heard from her the first admission I've ever heard by a standing Fed official that the economy is over-leveraged. She also said that financial reforms were in early stages, Frank Dodd was "a nice start" and that the agenda for reform wasn't done yet, never mind implementation of reforms. I got the impression that if she found herself in the chairman's role she'd knock a few heads together. Who better to do it than someone with her credentials who looks like your grandmother.

Thank you for the illumination.

The comments by Yellen in Q & A are encouraging, but that very same set of statements would likely disqualify her for post of Fed Chair.

Unless, of course, it is a case of 'Yes We Can' again...

[bart]

Re: EJ Appreciation Thread

EJ Appreciation