tag:blogger.com,1999:blog-8897997766931633186.post7470864350139566699..comments2024-02-14T03:21:37.506-05:00Comments on Monetary Freedom: DeLong on Nominal GDP targetingBill Woolseyhttp://www.blogger.com/profile/06330232724290161369noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-8897997766931633186.post-54865005948094196902016-05-08T10:32:14.096-04:002016-05-08T10:32:14.096-04:00I think you could never be sure of the policy and ...I think you could never be sure of the policy and these things. So, it’s the reason why we got to be so careful with everything. I am doing just that with help of broker like OctaFX, it’s incredible company to work with especially to do with their 50% bonus on deposit, it’s also use able and makes trading so much better for me given the money management that I can create due to this and this is what really makes me comfortable with everything.Rehmannoreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-46498836749228934012011-10-20T19:26:29.203-04:002011-10-20T19:26:29.203-04:00Bill: very good post. Paul Krugman also missed the...Bill: very good post. Paul Krugman also missed the IS shift to the right (or upward-sloping IS curve).<br /><br />I'm really not sure why this is. I'm sure both Brad and Paul are perfectly familiar with e.g. Old Keynesian arguments why an increase in expected future RGDP would increase current investment demand. Plus it would increase current consumption demand in any theory of the consumption function which was even vaguely full-employment.<br /><br />It might be that Paul's Japan model has IIRC only a 1 period recession (for simplicity), so everyone knows the economy will be back at the full equilibrium level of output next period.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-36373525044710029862011-10-20T16:55:18.429-04:002011-10-20T16:55:18.429-04:00There's one bit I'm having trouble underst...There's one bit I'm having trouble understanding. It's clear to me that if the fed is credible enough to change expectations, that the amount of actual buying they need to do will be small, or even negative (Nick's Chuck Norris analogy was excellent). <br /><br />The problem I see is that the bank is not currently credible in this direction. Whether it will magically be credible as soon as it announced an NGDP target is questionable. So therefore, it needs to have a way to back up it's claim forcefully. <br /><br />When it comes to short term interest rate targets, clearly it can do this, and banks know it, so there rarely need to be a lot of open market purchases to meet the interest rate targets.<br /><br />On the other hand, QE was not expected to be permanent or tied to any kind of expectation target, so in order to achieve significant traction, the fed had to purchase a *lot* of long term bonds.<br /><br />Now, if the fed can print money and buy *anything*, and its power to do so is unlimited, then clearly it can meet an NGDP target whether the market believes it or not, and eventually bettors against will be squeezed and forced to submit to the target.<br /><br />But given the current operational authority of the fed, I'm not sure it can do enough to meet an NGDP target unless the expectations channel works well. You mention "seeking changes in the law if necessary". If it turns out to be necessary, then the fed alone does not have the power to target NGDP, and if a critical mass of the market thinks it will be necessary and a political non-starter, then the expectations won't kick in properly and the policy will fail.<br /><br />This is my main worry with NGDP targeting: Can the existing fed credibly promise to move NGDP against the market if necessary.<br /><br />Am I missing something?Michael Sullivannoreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-76962010352551286322011-10-20T13:59:58.628-04:002011-10-20T13:59:58.628-04:00Really excellent blogging of late. I have enjoyed...Really excellent blogging of late. I have enjoyed many of your posts. Even the ones with math scribbles in them.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com