tag:blogger.com,1999:blog-8897997766931633186.post8823087906942659723..comments2024-02-14T03:21:37.506-05:00Comments on Monetary Freedom: Inflation Targeting and Goodhart's LawBill Woolseyhttp://www.blogger.com/profile/06330232724290161369noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-8897997766931633186.post-90895603543460008252016-03-23T10:56:41.644-04:002016-03-23T10:56:41.644-04:00Inflation can be really tough for anyone to manage...Inflation can be really tough for anyone to manage; I believe we need to make sure we are ready for every situation since that’s the only way we will be able to perform consistently. I never worry too much about these things since with having a broker like OctaFX, it is always easier for me given they provide me with daily market new and analysis service which is free of charge, so I can work things better and be safe in every situation.Adilnoreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-53931909611896084572012-11-29T23:09:38.024-05:002012-11-29T23:09:38.024-05:00Excellent blogging of late.
As usual, I disagree ...Excellent blogging of late.<br /><br />As usual, I disagree with economists who think that market participants are keenly attuned to Fed policy. <br /><br />In my years in furniture, trucking, cabinet making, house restoration, public relations---or in talking to many, many people in other trades---I never heard mention of Fed policy.<br /><br />Most people do not know what is the Fed or who is Bernanke. <br /><br />This does not undermine NGDP targeting. I think it is the way to go. <br /><br />I see no way for hyperinflation to result in a NGDP regime, but I see steady growth and moderate inflation, and I think those two conditions are requisite for a growing economy. <br /><br />Why moderate inflation? Well, wage and price stickiness and perhaps something relating the business confidence and investing. <br /><br />Certainly, one gains Dutch courage for real estate investing, if there is general inflation. Sooner or later, you will be able to pay down the mortgage in cheaper dollars, make some money on the widening spread between the mortgage and the property value. <br /><br />Buying a single property is risky. Roofs can go bad, tenants can become nightmares, etc. City can rezone, downzone. Taxes can go up.<br /><br />In zero inflation scenario, no one is going to buy real estate. Too much risk, unless prices go down a lot. Then, prices are going down, so why invest in real estate? See Japan.<br /><br />People who say the Fed causes booms are like people who say bartenders cause alcoholics or drunk drivers. <br /><br />But without the bartender, a night in the bar becomes rather dull, unprofitable. Better to stay home. <br /><br />The moral: The Fed should serve well enough booze to keep the bar hopping. <br /><br /><br /><br /><br /><br /><br /><br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-24582775394603589122012-11-29T21:24:05.858-05:002012-11-29T21:24:05.858-05:00"Goodhart's law, however, suggests that m..."Goodhart's law, however, suggests that market participants will come to expect this behavior by the central bank. If interest rates were to rise, there would be a strong tendency by market participants to postpone security sales and an added motivation to purchase securities. Alternatively, lenders would rush to take advantage of the ephemerally higher rates, while borrowers would wait for them to fall again. In the limit, actual market interest rates would not change at all, remaining exactly where the market believes the central bank wants them."<br /><br />Good post. Goodhart's law sounds suspiciously like Chuck Norris's law.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-8897997766931633186.post-60336570552929189032012-11-29T12:10:52.399-05:002012-11-29T12:10:52.399-05:00Nice post, but you don't explain why you think...Nice post, but you don't explain why you think GDP growth is an appropriate ultimate goal. Are you saying that output gaps can't happen under GDP targeting? Or just that they are less likely?<br />Maxnoreply@blogger.com