"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen


"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister


"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont


"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister


"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Saturday, December 28, 2013

Thursday, December 26, 2013

price change / Fed policy

Never Mistake a Change in Quantity Demanded for a Change in Demand by David Glasner

today's Republican Party is a result of a direct-mail fraud scam

I don't know this guy, but funny tweet (because it's true just ask Boehner.)

 Eli:
the Republican Party is a direct-mail fraud scam gone horribly awry.

In response to Matt O'Brien:
"What percent of the conservative movement is devoted to scaring old people into buying guns & gold?"

The Returned

Small Worlds by John Holbo


Wednesday, December 25, 2013

upgrade

 Q4 GDP: Here come the Upgrades by Bill McBride
Via the WSJ:  
Macroeconomic Advisers ... [raised] its estimate for fourth-quarter growth. It now forecasts gross domestic product to expand at an annualized rate of 2.6% in the final three months of the year, up three-tenths of a percentage point from an earlier estimate.
Read more at http://www.calculatedriskblog.com/#QUoS2HZRXvTD5Pcx.99
Macroeconomic Advisers ... [raised] its estimate for fourth-quarter growth. It now forecasts gross domestic product to expand at an annualized rate of 2.6% in the final three months of the year, up three-tenths of a percentage point from an earlier estimate.
And Goldman Sachs has increased their Q4 GDP tracking to 2.4% annualized growth.

And based on the November Personal Income and Outlays report:    
Using the two-month method to estimate Q4 PCE growth (first two months of the quarter), PCE was increasing at a 4.1% annual rate in Q4 2013. This suggests solid PCE growth in Q4.
Of course the contribution from private inventories will probably be negative in Q4, but final demand should be solid.

Macroeconomic Advisers ... [raised] its estimate for fourth-quarter growth. It now forecasts gross domestic product to expand at an annualized rate of 2.6% in the final three months of the year, up three-tenths of a percentage point from an earlier estimate.
Read more at http://www.calculatedriskblog.com/#QUoS2HZRXvTD5Pcx.99
Macroeconomic Advisers ... [raised] its estimate for fourth-quarter growth. It now forecasts gross domestic product to expand at an annualized rate of 2.6% in the final three months of the year, up three-tenths of a percentage point from an earlier estimate.
And Goldman Sachs has increased their Q4 GDP tracking to 2.4% annualized growth.

And based on the November Personal Income and Outlays report:
Using the two-month method to estimate Q4 PCE growth (first two months of the quarter), PCE was increasing at a 4.1% annual rate in Q4 2013. This suggests solid PCE growth in Q4.
Of course the contribution from private inventories will probably be negative in Q4, but final demand should be solid.

Read more at http://www.calculatedriskblog.com/#QUoS2HZRXvTD5Pcx.99
Via the WSJ:

Macroeconomic Advisers ... [raised] its estimate for fourth-quarter growth. It now forecasts gross domestic product to expand at an annualized rate of 2.6% in the final three months of the year, up three-tenths of a percentage point from an earlier estimate.
And Goldman Sachs has increased their Q4 GDP tracking to 2.4% annualized growth.

And based on the November Personal Income and Outlays report:
Using the two-month method to estimate Q4 PCE growth (first two months of the quarter), PCE was increasing at a 4.1% annual rate in Q4 2013. This suggests solid PCE growth in Q4.
Of course the contribution from private inventories will probably be negative in Q4, but final demand should be solid.

Read more at http://www.calculatedriskblog.com/#QUoS2HZRXvTD5Pcx.99
Via the WSJ:

Macroeconomic Advisers ... [raised] its estimate for fourth-quarter growth. It now forecasts gross domestic product to expand at an annualized rate of 2.6% in the final three months of the year, up three-tenths of a percentage point from an earlier estimate.
And Goldman Sachs has increased their Q4 GDP tracking to 2.4% annualized growth.

And based on the November Personal Income and Outlays report:
Using the two-month method to estimate Q4 PCE growth (first two months of the quarter), PCE was increasing at a 4.1% annual rate in Q4 2013. This suggests solid PCE growth in Q4.
Of course the contribution from private inventories will probably be negative in Q4, but final demand should be solid.

Read more at http://www.calculatedriskblog.com/#QUoS2HZRXvTD5Pcx.99

left left - inequality and creditors

Progressives see inequality as a fundamental part of why our economy is not working as it once did, not a problem to be placed above job creation.
Bill Keller recently provided a representative sample:
The left-left sees economic inequality as mainly a problem of distribution — the accumulation of vast wealth that never really trickles down from on high. Their prescription is to tax the 1 percent and close corporate loopholes, using the new revenues to subsidize the needs of the poor and middle class…
The center-left — and that includes President Obama, most of the time — sees the problem and the solutions as more complicated. Yes, you want to provide greater security for those without independent means (see Obamacare), but you also need to create opportunity, which means, first and foremost, jobs. … The center-left … agrees on the menace of inequality, but places equal or greater emphasis on the fact that the economy is not growing the way it did for most of the last century.
First of all, this is a bit rich to hear from the center. The left has been howling about jobs and growth for five years now, for so long and so loud that our collective tonsils have about come unglued — and who were we arguing against? The centrists, who were a major bloc of support behind the premature turn to austerity back in 2010. Better late than never, I guess. Welcome to the party, guys!
He links to:

Depression is a choice by Steve Randy Waldman
But the preferences of developed, aging polities — first Japan, now the United States and Europe — are obvious to a dispassionate observer. Their overwhelming priority is to protect the purchasing power of incumbent creditors. That’s it. That’s everything. All other considerations are secondary. These preferences are reflected in what the polities do, how they behave.
Waldman suggests buying off the "median influencer."

Tuesday, December 24, 2013

positive outlook?

Reason for Optimism? by Menzie Chinn
Finally, I think the factor that makes the growth more likely to be sustainable going forward, barring another debt-ceiling crisis or some sort of financial crisis overseas, is the fact that real household net worth has nearly reattained pre-crisis levels.

Monday, December 23, 2013

Krugman syllabus

ECO 348, The Great Recession, Preliminary Readings  by Krugman
Where I am so far (pdf). I clearly need more smart papers that disagree with me …

Medici-coin and the U.S. government

I like the show Da Vinci's Demons* in that the mythos has Da Vinci's humanism and science in tension with the church and unaccountable authority. Also Da Vinci himself - played by Tom Riley - is portrayed as a bit of a wag.** On the show, the Medicis are his sponsors.

Medici-coin by Izabella Kaminska

I think DeLong has a better comparison: the U.S. Government is now like the Medieval Medici Bank.
In a way, the United States government would then look like the Medieval Medici Bank. The Medieval Medici Bank doesn't pay you interest. It charges you fees. You don't lend it money in order to boost your wealth. You lend it money in order to keep your wealth safe--so that if the Pope excommunicated you and you had to flee the city of Lucca in the dead of night with only the clothes on your back, when you got to Paris you could draw on the local Medici bank. In a similar way, since 1990 the average growth rate of the economy has never been lower than and has often been much higher than the average interest rate the US pays on its debt. The US can simply borrows, roll over the borrowing, and watch, as time passes, the debt it owes shrink relative to the size of its economy. No reason to fear inflation. No policy changes required in order to make people hold Treasury debt at low interest rates. It just happens.
--------------
*new season in 2014
** He's an idiosyncratic genius like Jonny Lee Miller's Sherlock Holmes.

Stannis Baratheon looks bored again: 11 criminally underutilized TV actors

left left

Bill Keller's Center-Left Is the Reason We Are Growing Less Rapidly by Dean Baker

ways to ease while tapering

Since then, the Fed has tried to explain that less bond-buying doesn't mean rates will rise faster. The opposite, actually. The Fed will try to counteract its reduced bond-buying by raising rates even slower than it planned before. So it's taking monetary stimulus out with the right hand, and putting it back with the left. And there's still plenty more it can put back. After all, the Fed hasn't explicitly lowered its unemployment threshold, nor added an inflation floor. It's just suggested it will do both—and that was enough for now. That the taper didn't make stocks fall or expected rates rise shows that it was.

But there's still work to do. Unemployment is still above target, and inflation is still below. In fact, the Fed expects inflation to stay below target all the way through 2016. As Robin Harding of the Financial Times points out, that's the Fed admitting that it plans to fall short of what it says the best policy is right now. That best policy—what Janet Yellen calls "optimal control"—calls for above-target inflation the next few years to bring down unemployment faster. You can see what that looks like in the chart below from a speech she gave last year. 


In other words, the Fed doesn't need to figure out how to keep monetary stimulus constant even as it tapers. It needs to figure out how to increase monetary stimulus even as it tapers. Or stop tapering.

Sunday, December 22, 2013

2014 positive outlook

Looking for Stronger Economic Growth in 2014 by Bill McBride
1) The apparent budget deal takes a key downside risk off the table, and reduces the impact of the sequester.

2) Household balance sheets are in much better shape - and it appears that in the aggregate, household deleveraging is over.  The Fed just reported the first increase in total mortgage debt since Q1 2008.  See: Fed's Q3 Flow of Funds: Household Mortgage Debt increased slightly, First Mortgage Debt increase since Q1 2008, NY Fed: Household Debt increased in Q3, Delinquency Rates Improve, and Fed: Household Debt Service Ratio near lowest level in 30+ years
3) State and local government austerity is over (in the aggregate).

4) The housing recovery should continue. Housing has slowed recently (new home sales, housing starts), but the overall level is still very low and I expect further growth in 2014.

5) Commercial real estate (CRE) investment will probably make a small positive contribution in 2014.

Eliminating drags is important.  The drag from state and local governments is over. The drag from household deleveraging (in the aggregate) is ending. The threats of a government shutdown, not "paying the bills", and mindless austerity is over (assuming the budget deal is approved).  And  CRE investments are starting to appear.

All of these were impediments to growth over the last few years.

Yes, growth in the auto industry will slow in 2014, and housing has slowed recently (but I think we will see more growth in 2014).  However, overall it appears 2014 will probably be the best growth year for the recovery (the best was 2012 with 2.8% real GDP growth), and possibly the best year since Clinton was President.
Read more at http://www.calculatedriskblog.com/2013/12/update-looking-for-stronger-economic.html#H8ZvH1QK2Uy6IOxt.99
 2) Household balance sheets are in much better shape - and it appears that in the aggregate, household deleveraging is over.  The Fed just reported the first increase in total mortgage debt since Q1 2008.  See: Fed's Q3 Flow of Funds: Household Mortgage Debt increased slightly, First Mortgage Debt increase since Q1 2008, NY Fed: Household Debt increased in Q3, Delinquency Rates Improve, and Fed: Household Debt Service Ratio near lowest level in 30+ years

3) State and local government austerity is over (in the aggregate).

4) The housing recovery should continue. Housing has slowed recently (new home sales, housing starts), but the overall level is still very low and I expect further growth in 2014.

5) Commercial real estate (CRE) investment will probably make a small positive contribution in 2014.

Eliminating drags is important.  The drag from state and local governments is over. The drag from household deleveraging (in the aggregate) is ending. The threats of a government shutdown, not "paying the bills", and mindless austerity is over (assuming the budget deal is approved).  And  CRE investments are starting to appear.

All of these were impediments to growth over the last few years.

Yes, growth in the auto industry will slow in 2014, and housing has slowed recently (but I think we will see more growth in 2014).  However, overall it appears 2014 will probably be the best growth year for the recovery (the best was 2012 with 2.8% real GDP growth), and possibly the best year since Clinton was President.

1) The apparent budget deal takes a key downside risk off the table, and reduces the impact of the sequester.

2) Household balance sheets are in much better shape - and it appears that in the aggregate, household deleveraging is over.
Read more at http://www.calculatedriskblog.com/2013/12/update-looking-for-stronger-economic.html#H8ZvH1QK2Uy6IOxt.99
1) The apparent budget deal takes a key downside risk off the table, and reduces the impact of the sequester.

2) Household balance sheets are in much better shape - and it appears that in the aggregate, household deleveraging is over.
Read more at http://www.calculatedriskblog.com/2013/12/update-looking-for-stronger-economic.html#H8ZvH1QK2Uy6IOxt.99

NSA Monetary Policy

They should buy and sell massive amounts of Dunning-Kruegerrands* causing the price to swing wildly. Yellen should do unconventional stealth monetary policy via the NSA crediting Americans' accounts until we hit NGDP path level targets and wage inflation. Hard-money glibertarian Rand Paul would be scandalized if he ever found out.

Postmodern Monetary Theory: The NSA and Unconventional Monetary Policy by Peter Dorman
One item that has attracted a bit of attention is a proposal, lodged in Recommendation 31, that reads as follows:
We recommend that the United States should support international norms or international agreements for specific measures that will increase confidence in the security of online communications. Among those measures to be considered are:

(1) Governments should not use surveillance to steal industry secrets to advantage their domestic industry;

(2) Governments should not use their offensive cyber capabilities to change the amounts held in financial accounts or otherwise manipulate the financial systems....
This last item is interesting. No documents have yet been released that suggest that the NSA or its foreign affiliates have altered financial accounts through electronic manipulation, but the commission presumably had access to a wide range of materials without knowledge of which will be made public in the future. It may be the case, then, that they are acting to preempt a future revelation. Even if there has actually been no such financial intervention, however, it is clear that there could be and that it would be prudent to consider the implications of such actions.
 *Bitcoins.

Abenomics

Michael Darda: How is Abenomics Doing?: “Leading indicators in Japan have been on the upswing…. Abeonomics is working. One reason that the previous round of QE in Japan didn’t lift growth much is that it was expected to be temporary and proved to be temporary as occasioned by a 20% collapse in the monetary base in 2006. This time, however, at least part of the increase in the base is expected to be permanent, hence the new 2% inflation target. In short, the BoJ has to do enough to satiate a broad money demand function that has been growing 2-3% per annum…. Reflation should help to ease Japan’s debt and fiscal burden… restoring at least moderate NGDP growth should help Japan’s budgetary fortunes. This is one reason that the rise in Japan’s inflation breakeven spreads has been inversely related to credit default swap spreads on Japan’s debt. Broad money growth in Japan has begun to recover convincingly, which should also be bullish for the equity market…. We believe Japan equities have 20-40% upside…”

(via DeLong)