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2nd recession is looming..

I don't agree with this statement. FED can't get out of its position QUICKLY without spiking interest rates. But, who said they will? TWIST focused on selling short term positions to buy long term bonds to hold long term interest rates low. The current QE, the biggest one, focused on long term bonds. I have been worried about the increase in the budget item for "interest on the debt" when rates go up, but suppose the FED holds those bonds for 30 years? They are very low interest rates that we borrowed at. If the FED holds them, they will roll off slowly, interest on the debt will NOT go up for 30 years, and by that time the bonds can be paid off in inflated dollars. That is my thesis for how the FED can get out of this slowly and without damaging the economy too much.

What is your thesis for how the economy collapses?

The fed totally changes courses, in the opposite (and thus wrong) direction.

Of course that's unlikely to happen, so it's not that much of a concern.

When our economy starts to show strong growth, or inflation above the target rate, the fed will taper QE, and will follow the course that you set forth, which I believe to be the most likely scenerio (assuming that some tea party whackjob doesn't takeover the fed, or Dr. Evil for that matter, you know he is in cahoots with the fed to take over the world and all).
 
I don't agree with this statement. FED can't get out of its position QUICKLY without spiking interest rates. But, who said they will? TWIST focused on selling short term positions to buy long term bonds to hold long term interest rates low. The current QE, the biggest one, focused on long term bonds. I have been worried about the increase in the budget item for "interest on the debt" when rates go up, but suppose the FED holds those bonds for 30 years? They are very low interest rates that we borrowed at. If the FED holds them, they will roll off slowly, interest on the debt will NOT go up for 30 years, and by that time the bonds can be paid off in inflated dollars. That is my thesis for how the FED can get out of this slowly and without damaging the economy too much.

What is your thesis for how the economy collapses?

Wait for it . . . austrian will claim "hyperinflation is just around the corner". Austrians always do.
 
I'd argue that we are still in a recession, albeit not the common definition of one. Yes we are growing but where? The top 1%. Most everywhere else incomes are dropping, full time work is going to part time work, labor participation rate is falling, etc...

In any measure that matters to the non-rich in this country, things are getting worse.
 
I'd argue that we are still in a recession, albeit not the common definition of one. Yes we are growing but where? The top 1%. Most everywhere else incomes are dropping, full time work is going to part time work, labor participation rate is falling, etc...

In any measure that matters to the non-rich in this country, things are getting worse.

While it's not a technical recession, Krugman argues we're in a depression -- a period of depressed growth and static or falling income after a macroeconomic event involving a large recession. And he's got a point.
 
Productivity is the units of value created per man hour, production is the amount of total work done. But I think you know that already.

Yes, there is a difference.. Productivity is up per man hour.. for more jobs to be created it has to go down. :lol:

Basically if you want job numbers to increase you need productivity to fall but production to stay the same. If productivity and production are increasing with less employees then jobs will not be created.



Sure, thats true, but that doesn't mean that growing income disparity isn't harming sales at Walmart.

And I am not saying it isn't or is either. Rather income disparity vs production are separate issues when posted as is in the OP.

thats interesting to know. If I can only count on you for one thing, it's doing your research on the detail.

So some times the "smartest" people in the room are some time the dumbest.




Actually I think it is conservatives who play the theory game. But of course we will never agree on that issue.

This type of comment drives me up a wall. There is a huge different between theory and law in economics (like science).

Conservatives rely on economic laws in their opinions. Such as Supply and Demand. When they say you should be able to buy insurance across State lines.. that's a supply and demand answer. That's a tried and tested economic law.



If this is true, then this means that the Fed is the only thing that kept our economy from collapsing during the Great Recession, thus I would think that they must have done a pretty good job at what they are supposed to do. They need to just keep doing whatever they have to do to prevent the economy from collapsing until it is strong enough, or until we have gov policies (or the elimination of bad gov policies) which will allow our economy to survive without the life support.

No, you are making the same mistakes the Fed is. The Fed printing the money is what caused the bubble we are calling a recovery. It's not a good thing they are doing that for the long term health of the US economy as resources are being allocated incorrectly. That mis-allocation will lead to bigger problems down the road. Much like the housing bubble. They are only preventing the current problem for a problem down the road. Essentially kicking the can down the road when they aren't sitting on the board of the FOMC. There were and still aren't easy answers for a recovery in a 1st world economy during globalization. The Fed is living in the 20th century when the problems are 21st century problems.



My theory is that if unemployment drops below 5%, even if it is due to more part time workers, eventually the unemployment rate will be low enough that companies will have to start competing harder for workers, and thus either compensation will start to climb, or employers will start to hire more full timers. So a workforce full of 29 hour/wk workers may be an intermediate step to full recovery. Heck, I would love to just work 29 hours a week, if I could keep my same standard of living.

Your theory is wrong. It's proven not to work in Europe. France has had 35 hour work week since 2000, knocking 4 hours of the 39 hours work week. Then capped overtime to 220 hours a year (That's basically 39 hours a week). All in attempt to bring down unemployment. It has failed horribly.

You will never keep your standard of living working 29 hours a week as your wages would not keep up with inflation.
 
I don't agree with this statement. FED can't get out of its position QUICKLY without spiking interest rates. But, who said they will? TWIST focused on selling short term positions to buy long term bonds to hold long term interest rates low. The current QE, the biggest one, focused on long term bonds. I have been worried about the increase in the budget item for "interest on the debt" when rates go up, but suppose the FED holds those bonds for 30 years? They are very low interest rates that we borrowed at. If the FED holds them, they will roll off slowly, interest on the debt will NOT go up for 30 years, and by that time the bonds can be paid off in inflated dollars. That is my thesis for how the FED can get out of this slowly and without damaging the economy too much.

What is your thesis for how the economy collapses?

The Fed can't get out of it's position because it put itself in that position. QE 1 was all they should have done (at most in my opinion). OP Twist is the current bond buying program and as you said it was to lower long term interest rates.. but since OP Twist, the 10, 20, 30 year is almost 1% or more higher. Daily Treasury Yield Curve Rates

So has OP Twist worked? Nope. It's made those bonds a trade for Hedge Funds and Banks.

There is only 2 ways for the Fed to reduce it's position and the Fed's expanded balance sheet...

1) To reduce their balance sheet they have to sell what they bought. Those are Bonds and MBSs. They have to sell their long holdings (bonds) and the only way they can really do that is if the Treasury Department reduces it's issuing of long bonds while the Fed unwinds. But ups it's short end bonds. Meaning increased interest payments on the short end would increase. That means less money in the budget.

2) US Government reduces the deficit massively while financing short term and the Fed can unwind it's position.

Other then that there is no way the Fed can hold long positions without causing a massive bubble.
 
I don't agree with this statement. FED can't get out of its position QUICKLY without spiking interest rates. But, who said they will? TWIST focused on selling short term positions to buy long term bonds to hold long term interest rates low. The current QE, the biggest one, focused on long term bonds. I have been worried about the increase in the budget item for "interest on the debt" when rates go up, but suppose the FED holds those bonds for 30 years? They are very low interest rates that we borrowed at. If the FED holds them, they will roll off slowly, interest on the debt will NOT go up for 30 years, and by that time the bonds can be paid off in inflated dollars. That is my thesis for how the FED can get out of this slowly and without damaging the economy too much.

What is your thesis for how the economy collapses?

Let me take a shot at answering your question. The mere mentioning of trimming the buying of long term bonds moved the rate on 10 year treasuries from about 1.6% to 2.9%. Mortgages went from about 3.3% to about 4.7%. In a short period of time we saw a large decline in mortgage applications with banks cutting their staffing in their mortgage departments. This with just the hint of a possible cut. Now I would agree the term collapse might be over the top, but our growth is so tepid that any downward move is not helpful.

We should also remember that the economy has normal ups and downs as does inflation. If inflation moves higher the Fed will not be able to keep growing the balance sheet and keeping short term rates at zero. With both housing prices and rents moving so much higher, not sure who this has not shown up in inflation numbers yet, but will over time. Housing is something like 40% of the CPI model.
 
If this is true, then this means that the Fed is the only thing that kept our economy from collapsing during the Great Recession, thus I would think that they must have done a pretty good job at what they are supposed to do. They need to just keep doing whatever they have to do to prevent the economy from collapsing until it is strong enough, or until we have gov policies (or the elimination of bad gov policies) which will allow our economy to survive without the life support.
Yeah. And that problem is owned and operated by congress, not the Fed.
 
I'd argue that we are still in a recession, albeit not the common definition of one. Yes we are growing but where? The top 1%. Most everywhere else incomes are dropping, full time work is going to part time work, labor participation rate is falling, etc...

In any measure that matters to the non-rich in this country, things are getting worse.
The current definition of recession is about as much bull**** as the methodology for calculating unemployment. When the median wage falls, poverty rate rises, and social mobility is diminishing, that should most definitely be referred to as recession.
 
While JP doesn't want to hear what I have to say.. let's examine this stupidity..



Wal-Mart cutting 2% due to inventory backlog is not a indicator of another "recession" because if anybody read past the headline from Bloomberg and looked at the numbers.. Wal-Mart isn't cutting 2% due to falling sales but rather what naturally happens this time of year and usually in the spring. Wal-Mart has excess inventory. It won't buy more of stuff they have sitting in a warehouse as it effects the bottom line (earnings). This is business 101.

Wal-Mart cutting US orders amid inventory backlog: report



Because of the FED printing money. QE should have stopped after QE 1. But we had to triple down on it for Government budget issues and politics.



The jump in 2009-2010 was due to pent up demand. Happens all the time in recessions and recoveries and so is the falling industrial capacity utilization after the pent up demand returns to normal. It's literally like this.. if you get a check for $10,000 (outside of your normal income) and you spend it all. You spend it all in one year and the following year you don't get that $10,000 check again..can you keep spending $10,000 above your normal income? Of course not, so you would return to your normal spending habits after that spending spree. The pent up demand is an outlier. It's a blimp or a mini-bubble in the scheme of things and not an indicator of what is normal. So we are returning to "normal levels" (pre-2008).





Wow, color me surprised. You are making illogical conclusions on what's going on.. and leave an open ended date. Signs are just fine, Fed isn't tapering and free money is around for all. There is a slim to zero chance of a recession while the Fed is printing money. Only way a recession happens is if the dollar collapses but I can't give a date on when that happens as I don't have a crystal ball but it's gonna happen.. :2wave:

And really? You are gonna equate the debt ceiling not being raised as the end of the western world... didn't you learn from the sequestration which didn't kill the economy as predicted.

So you think failing to raise the debt ceiling is the same a same as a budget cut? How so?
 
So you think failing to raise the debt ceiling is the same a same as a budget cut? How so?

Raising the debt ceiling is just a blank check to spend more on useless crap. Putting a cap on the debt ceiling to 100% of GDP is in itself a way to cut the budget and limit spending just to necessary programs. The US debt to gdp is 100% already. Problem is people are looking for easy answers and the easiest is to raise the debt ceiling instead of cutting and/or raising taxes.

We can cut 2013 Defense spending by half.. and be at levels of 1998. That's $300 billion a year saved.
We can raise retirement age and/or uncapping FICA taxes.

But these are large cuts and fixes that would piss off your dependable voter which is why it's NEVER done.

What Can We Cut to Balance the Budget? | LearnLiberty
 
I do believe part of prediction one may have just came true tonight.
 
Other then that there is no way the Fed can hold long positions without causing a massive bubble.

Nonsense! Or are you saying the Fed has a balance sheet full of perpetuities?
 
Nonsense! Or are you saying the Fed has a balance sheet full of perpetuities?

No what I am saying is the Fed has long term bonds in which it would have to get rid of if it needs to deal with future short term issue. If they don't they flatten the yield curve and blow up the whole system again.
 
"The negatives:

Profit growth already low and slowing
Car sales rolled over in September
New home sales already rolled over
Housing starts flattened
Personal income anemic, and distribution issues further softening demand
800,000 federal workers not getting paid
0 rate policy/QE is a deflationary bias
Pro active austerity already initiated
Federal deficit looking too low for financial conditions
Markets/analysts have ignored/ridiculed the paradox of thrift so are ‘long and wrong’
Japan’s currency depreciation works against US and euro domestic demand

Not only no chance of fiscal relaxation if things go bad, but more likely further fiscal tightening.

So it’s thereby worse than flying without a net.

The positives:

Just rhetoric-
Americans are resilient and all that…"

The Center of the Universe » Blog Archive » Shutdown- this time it’s very different
 
No what I am saying is the Fed has long term bonds in which it would have to get rid of if it needs to deal with future short term issue. If they don't they flatten the yield curve and blow up the whole system again.

They don't have to alter the size of their balance sheet at all, regardless of inflation expectations. The Fed can simply increase the interest paid on excess reserves and increase the discount rate as securities mature their way off their balance sheet.
 
They don't have to alter the size of their balance sheet at all, regardless of inflation expectations. The Fed can simply increase the interest paid on excess reserves and increase the discount rate as securities mature their way off their balance sheet.

I don't disagree but that comes down to timing and that's something the Fed is never good at.
 
I don't disagree but that comes down to timing and that's something the Fed is never good at.

The Fed has been pretty good at modulating rates over the past 20 years to keep inflation at moderate to low levels. Admittedly, it was easy after the Bush Meltdown, since the real threat was deflation, not inflation. But the Fed's record has been good even in the periods when the economy was expanding at a brisk pace.
 
The Fed has been pretty good at modulating rates over the past 20 years to keep inflation at moderate to low levels. Admittedly, it was easy after the Bush Meltdown, since the real threat was deflation, not inflation. But the Fed's record has been good even in the periods when the economy was expanding at a brisk pace.

1970's was pretty bad, so were the greenspan put years which included Clinton's admin.
 
1970's was pretty bad, so were the greenspan put years which included Clinton's admin.

Inflation was much worse in the early 80's, of course conservatives don't like to point that out.
 
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