Good move by the Federal Reserve

[muck]

a bit of a boring read, but a good idea to show the markets that the Fed is actively engaged in devoloping tools to remove potential excess liquidity from the system in the event that it's needed in the future

[Azazello1313]

I've been reading the blog of a guy makes a pretty strong argument that this whole crisis has been exacerbated beyond all necessity by far too TIMID monetary policy, that they can and should be doing a lot more expansive monetary stuff than just taking interest rates to zero, that inflation is a bogeyman in this instance, and so on. not that I was ever very schooled when it comes to this stuff, but before I started reading his blog, you would have had a hard time convincing me that those positions were correct in any way, but I've come to the opinion he's really actually on to something.

 

his name is scott sumner, his blog is here, and the best place to start reading would be this post and maybe listening to that podcast at the top of the link.

Edited December 1, 2009 by Azazello1313

[wiegie]

... inflation is a bogeyman in this instance, and so on. not that I was ever very schooled when it comes to this stuff, but before I started reading his blog, you would have had a hard time convincing me that those positions were correct in any way,

I've been telling you that for more than a year.

[Azazello1313]

I've been telling you that for more than a year.

 

well a big part of his monetary theory is that fiscal "stimulus" is basically pissing in the wind here. another area where events seem to be proving him right. but yeah, you're right...I've come around to the idea that deflation is a whole lot scarier than inflation.

 

have you read much of sumner's stuff?

[Grimm74]

well a big part of his monetary theory is that fiscal "stimulus" is basically pissing in the wind here. another area where events seem to be proving him right. but yeah, you're right...I've come around to the idea that deflation is a whole lot scarier than inflation.

 

have you read much of sumner's stuff?

 

Deflation is always much scarier then inflation. At least inflation can self regulate itself where as deflation can be an unstoppable wildfire feeding on itself.

 

From the article "Along with raising the overnight bank lending rate, Fed officials have said they may use reverse repos, pay interest on excess bank reserves and sell securities directly to investors to withdraw or neutralize cash in the banking system."

 

Anyone care to expand on the bold print above? How does this work?

[dmarc117]

derpression part 2 is acoming

[Avernus]

I don't think inflation is a boogeyman as it has been a good way to get us to work for less purchasing power over the past (almost) 80 years...

 

Over time the dollar obviously devalues which is a good thing for a growing economy, but there should be a cap on it or at least a slowing process. The problem is that when the cost of living goes up, it appears as if it always goes up more than when the average rate of pay does...

 

So over time, we do the same work but are able to buy less with our time spent working..

 

take the recent raise in minimum wage here in Philadelphia where minimum wage went up about 13.5% (or something to that effect, I did the math like 5 months ago) but the price of food and whatever else goes up about 18%.....

 

every time the value of the dollar goes down and the adjustment is made to where we can make more, we actually make less with our time spent working for it...