Tyler Cowen on housing bubbles and NGDP targeting
In my book entitled The Money Illusion, I argued that the housing bubble of 2003-06 was not the cause of the Great Recession, partly because there was no housing bubble. Instead, the real problem was nominal—a tight money policy drove NGDP growth from 5% to negative 3%.
In a recent podcast with Pradumnya Prasad, Tyler suggests (around the 55 minute mark) that he’s changed his mind on the events leading up to the Great Recession, and no longer believes there was a nationwide housing bubble.
Tyler instead points to problems in the shadow banking system, which in my view were mostly (not entirely) a symptom of the recession, not a cause. Prasad then discusses the view that Fed policy caused the Great Recession (a view held only by me and a tiny number of other market monetarists.) If one insists on talking about interest rates, then one might say that the Fed held rates above equilibrium during 2008, as the housing slump sharply reduced the equilibrium interest rate. Banking problems post-Lehman were mostly an effect of that tight money policy, which sharply reduce asset values.
Tyler suggests that he supports NGDP targeting, but doesn’t think it fits all situations. I don’t find his reasoning to be persuasive, but of course it’s hard to make subtle points in an interview format. If I had to defend his general view, I’d make the following sort of argument:
It’s useful to differentiate between a NGDP targeting regime, and NGDP as a short-term guidepost when the central bank is trying to achieve some other objective. Thus while a regime of 4% NGDP growth may be optimal, if the previous year has seen 0% or 8% NGDP growth, and the central bank doesn’t have a 4% NGDP target, then it may or may not not be optimal to suddenly shift to 4% NGDP growth.
Overall, I was pleased to see Prasad mention the hypothesis that the Fed caused the 2008-09 recession. It makes me feel that we might be making a bit of headway in getting our ideas out into the broader community.
Tags:
6. September 2023 at 20:04
On Tyler and NGDPT you say “I don’t find his reasoning to be persuasive”.
Does he state his reasoning in that podcast? I will listen to it if he does.
6. September 2023 at 20:08
Thanks for the shoutout, Scott!
6. September 2023 at 20:20
Market, There’s just a short bit on NGDP, and he talks about the issue in a fairly general fashion, without getting too much into specifics.
Pradyumna, I thought you did a great job.
7. September 2023 at 03:45
Bernanke conducted the most contractionary money policy since the Great Depression. Then Bernanke destroyed the nonbanks by remunerating interbank demand deposits.
It was not only means-of-payment money that was tight, but the proportion of time deposits to transaction deposits grew to their highest historical levels, bottling up savings (as banks don’t lend deposits). So, the growth in M2 was misleading.
Yes, Bernanke “did it again”.
7. September 2023 at 05:03
I made the argument some years ago, but the shadow banking crisis would have started in March 08 without the Bear bailout. It really started in August 9, 2007 when BNP Paribas suspended withdrawals from subprime funds.
I guess for me, the thing is that the underlying legal mechanisms are very extreme once a Rubicon gets crossed into receiverships and bankruptcies. If the Fed had issues targeting NGDP levels up to March 2008, they were minor. The Fed missed the mark in 01-03 moreso than 2007 to March 2008. But with no 13(3) programs, then the five investment banks and AIG would have gone into bankruptcy. Lowering rates to zero, QE of public assets and expectations would just not have been enough to restore NGDP.
7. September 2023 at 05:22
Scott,
I’m not an expert on what Tight Money looked like in the 2000’s. Can you explain how the Feds could have done things differently back then to loosen up the money. Should they have lowered interest rates earlier? Gone to zero rates in 2007? I assume there are other methods they should have used to loosen money outside of affecting interest rates.
7. September 2023 at 08:51
Matt, I agree that our banking system is highly flawed, but I don’t agree that this was the cause of falling NGDP. Causation goes in the other direction.
NGDP skyrocketed after March 1933, despite much of the banking system being shutdown for many months. Banking and NGDP are two entirely different issues. With NGDPLT, the banking crisis of 2008 would have been extremely mild. (The media told us with confidence that the March 2023 banking problems would trigger a recession. How’d that work out?)
And yes, Bear should have been allowed to fail.
Dr. Richard, The problem was not the specific steps taken–it’s impossible to know what sort of interest rate would have been appropriate. The problem is they had the wrong target. They should have had a NGDP level target. Then adjust the monetary base until the market expects them to hit that target going forward.
With NGDPLT, it’s possible that a HIGHER interest rate would have been necessary, as expectations would have been more bullish.
7. September 2023 at 12:19
Folks, monetary policy was too tight in the US, but the true catastrophe came from the eurozone. St. Milton warned them, but Europeans tend not to listen to Americans.
7. September 2023 at 12:33
The monetary base, MO, is ill-defined. It is not “high powered money”. MO includes currency. An increase in the currency component is contractionary, unless as in practice, is offset by FED credit. And MO was predominately currency.
Required reserves represents base money. Why do you think Volcker failed (caused two recessions)? Why do you think Greenspan caused “Black Monday”? How do you think Bernanke caused the Great Recession?
Bernanke drained base money for 29 contiguous months.
7. September 2023 at 13:24
The government essentially gave a blanket backstop to mid to high end banks after the 1933 banking holiday, through the Fed and then of course deposit insurance. There were also still theoretical mechanisms then to stop withdrawals while keeping the banking system going. Right before the holiday, the NYT reported the NY Clearinghouse was printing Clearinghouse certificates. A lot of ads ran that said the advertiser will accept certificates or checks.
For unsecured creditors of non-banks in 2008, such as Commercial Paper holders or some brokerage clients, bankruptcy is far more extreme than old-time suspensions. Repo holders have special treatment where they can sell the collateral outside the automatic stay. But if the collateral was non-Tsy/non-Agency paper, then there would be a firesale (if it could be sold at all). Massive QE would help firesale risk, though I don’t know how the issuance of QE-able assets compared to private security collateral in March 2008.
In the end, the Reserve Primary Fund didn’t pay back anything until December. Similar suspensions for other Prime MMFs were only stopped by ESF backing all MMFs and then 13(3) providing liquidity. Lehman’s bankruptcy involved multiple jurisdictions, with the UK brokerage subsidiary paying over 100 cents on the dollar but several years later.
Prime MMFs were around $2 trillion in 2008. Mutual funds lending securities and reinvesting the cash was another source of funding into short-term non-bank liabilities. It’s not widely known that somebody with a boring index fund in 2006 was an ultimate source of funding subprime mortgages. Besides these trillions getting locked up in court, a blank check in discount window and swap lines kept trillions more of the monetary base from being locked up.
7. September 2023 at 15:10
I agree.
7. September 2023 at 21:50
Matt, Mass bankruptcies are caused by falling NGDP. If the Fed had kept NGDP growing at 5%/year, there would not have been many bankruptcies in 2008.
7. September 2023 at 23:47
Scott, you say:
…”then one might say that the Fed held rates above equilibrium during 2008, as the housing slump sharply reduced the equilibrium interest rate”….
I ask: what explains the “sharp slump” in the equilibrium interest rate? There was no exogenous shock (war, pandemic, etc.) to the system, if I remember correctly. How then, do you get this sharp drop?
Or, could it be that sharp slumps are the endogenous consequence of “bubbles”? (there was also an emerging markets bubble). Bubbles that were caused by lax monetary policy in the first place?
8. September 2023 at 01:50
On this topic, my view has evolved a bit in a way that maybe you’ll find interesting.
Even in my last book I still put tightened lending as a lagging factor that had little causally to do with the recession but slowed the recovery and created a regressive wealth shock.
But at my substack, I have a model that attempts to differentiate home price changes between cyclical, supply-side, and credit factors. Because of that model, I now think that novel tightening of lending standards created a shock to low tier housing markets by the beginning of 2008 and was an important causal factor in all of the subsequent developments such as a dropping neutral interest rate, defaults motivated by negative equity, etc.
Here’s a recent post on the topic:
https://kevinerdmann.substack.com/p/the-great-recession-was-caused-by
Here’s an earlier post where you can see a sharp trend shift in valuation components that should be rather slow changing in cities where home prices had not been elevated, and where the shift coincides with the change in credit scores of new borrowers tracked by the NY Fed.
https://kevinerdmann.substack.com/p/the-damage-from-the-mortgage-moral
The Fed is the last mover, of course, in determining the trend in nominal spending. And they had set the table for a contraction by the end of 2007 before the new tightening of lending standards became disruptive. But tightened lending at the federal agencies landed one whale of a punch on the economy well before September 2008.
8. September 2023 at 04:39
Well, Tyler mentioned in his recent podcast celebrating the 20th anniversary of the Marginal Revolution blog that yours is one of the few blogs that he (still) reads, so he should see your critique! In the same podcast, Alex Tabarrok explains that while he tries to strip back complexity and focus on principal causes (I suspect like most economists), Tyler tends to refer to 5 or 6 reasons for various phenomena. I wonder if that kind of mindset predisposes someone to shun economical Occams Razor-type explanations like the Fed causes nominal instability?
8. September 2023 at 07:06
“Spencer, this is an interesting idea. Since no one in the Fed tracks reserves…” Richard G. Anderson
Required reserves were the FED’s ELEPHANT TRACKS. But you can’t run a regression test against the data since the FED mopped up its tracks. Legal reserves were an ex-ante measurement, not an ex-post measurement.
I.e., the distributed lag effect of legal reserves were mathematical constants.
8. September 2023 at 07:13
To think that an NGDP targeting strategy would have prevented/lessened the severity of the GFC is misguided. The extreme deflationary pressures during this time was driven by the destruction of private sector collateral (I.e. credit creation from the repo markets backed by non agency mortgage collateral completely seized up and still has not recovered to this day).
The ideas that the Fed could have offset this destruction of money creation to a level that would have prevented this seems silly to me. The Fed can boost reserve levels, but can’t force its members to lend, which is exactly what happened.
If you’re new to this blog, let me remind you that Scott doesn’t understand that bank lending creates money, not the Fed.
8. September 2023 at 10:32
The constriction of N-gDp was a constriction of money flows. The collateral that seized up was a product of that constriction.
Bernanke being ignorant, drained legal reserves. Yes, reserves were still “binding”. That lowered American Yale Professor Irving Fisher’s price level. Bernanke turned otherwise safe assets into impaired assets. That constriction was first felt in the E-$ market (“a complete evaporation of liquidity”).
2006 jan ,,,,,,, 45496 ,,,,,,, 0.04
,,,,, feb ,,,,,,, 43084 ,,,,,,, 0.01
,,,,, mar ,,,,,,, 41242 ,,,,,,, -0.02
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,,,,, may ,,,,,,, 43648 ,,,,,,, -0.02
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,,,,, nov ,,,,,,, 40543 ,,,,,,, -0.06
,,,,, dec ,,,,,,, 41461 ,,,,,,, -0.07
2007 jan ,,,,,,, 43113 ,,,,,,, -0.11
,,,,, feb ,,,,,,, 41214 ,,,,,,, -0.09
,,,,, mar ,,,,,,, 39159 ,,,,,,, -0.11
,,,,, apr ,,,,,,, 41072 ,,,,,,, -0.09
,,,,, may ,,,,,,, 42699 ,,,,,,, -0.05
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,,,,, jul ,,,,,,, 41164 ,,,,,,, -0.08
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2008 jan ,,,,,,, 42398 ,,,,,,, -0.07
,,,,, feb ,,,,,,, 41070 ,,,,,,, -0.05
,,,,, mar ,,,,,,, 39731 ,,,,,,, -0.04
,,,,, apr ,,,,,,, 41642 ,,,,,,, -0.03
,,,,, may ,,,,,,, 43062 ,,,,,,, -0.01
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,,,,, aug ,,,,,,, 42055 ,,,,,,, 0.02
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,,,,, oct ,,,,,,, 46930 ,,,,,,, 0.17
,,,,, nov ,,,,,,, 50363 ,,,,,,, 0.24
,,,,, dec ,,,,,,, 53723 ,,,,,,, 0.30
8. September 2023 at 10:58
vienncapitalist, It’s no surprise at all that the severe housing slump sharply reduced the equilibrium interest rate. That’s exactly what theory would predict when lending standards tighten dramatically.
And there was no housing bubble—the prices were rational. Read Kevin Erdmann’s work.
Kevin, I agree, see my response above.
Rajat, Tyler’s eclectic analytical approach usually serves him well, but not when it comes to nominal shocks (for the reason you identify.) In those cases, you need to focus like a laser on NGDP (i.e. monetary policy).
Nick, “Scott doesn’t understand that bank lending creates money, not the Fed.”
LOL, are you an MMTer? Read my books–you might learn something.
8. September 2023 at 11:37
One more thing about a recent Tyler Conversations – the one with Noam Chomsky from a few months back is fascinating. Chomsky has no time for capitalism as we know, and blames the West – specifically the US – for poor economic outcomes in socialist countries like Nicaragua and Cuba. Given your previous comments, I’d be interested in knowing whether you might agree with him to some extent. You would almost certainly agree with comments like:
“When the United States imposes sanctions, they are third-party sanctions. Every country in the world has to accept them.”
“If the European Union tries to trade with Cuba, the US threatens it with throwing it out of the international financial system. The European Union obeys the US sanctions.”
8. September 2023 at 15:38
Sorry if this is in the book, I have it but haven’t gotten to read it yet. Do you think the tight monetary policy caused the great recession outright or it exposed existing problems like subprime mortgages, etc.
8. September 2023 at 19:49
I am the problem. It is me.
I remember at the time seeing the run up in oil prices and other commodities and perceiving that inflation was higher than stated. In that frame of mind, which I think was shared by the Fed, supported tightening policy.
Tightening policy even in a environment where the neutral-rate was falling.
Still, I would say that the neutral-rate was falling in part by a hysteria that was created by the governing class around the housing market. I recall an analysis from many years ago that pretty much showed banks failing in the sequence of their leverage ratios. Bear sterns was something like 77:1 for instance. For me that confirmed that this wasn’t a housing driven crash. Policy crashed the banks.
I’d also note that the Fed made quite a profit off those supposedly rotten MBS and banks repaid their TARP funds with profit back to the government.
Last, GWB gets hung for his ‘great recession’ deficit spending but that’s a cash flow accounting metric. He spent on TARP and all that money plus show came back to the treasury to conceal part of the debt blowout that followed.
9. September 2023 at 05:50
As Leonard Da Vinci explained:
“Before you make a general rule of this case, test it two or three times and observe whether the tests produce the same effects”.
The Stock Market Was Rocked by a Mysterious ‘Flash Crash’ Five Years Ago. What You Need to Know. | Barron’s
“Diminishing market depth and a surge in volatility were both on display Oct. 15, when Treasuries experienced the biggest yield fluctuations in a quarter century in the absence of any concrete news. The swings were so unusual that officials from the New York Fed met the next day to try and figure out what actually happened”
Link: Joint Staff Report: The U.S. Treasury Market on October 15, 2014
https://www.sec.gov/files/treasury-market-volatility-10-14-2014-joint-report.pdf
“(Bloomberg) — Trading Treasuries keeps getting tougher and tougher.
For decades, the $12.5 trillion market for U.S. government debt was renowned for its “depth,” Wall Street’s way of talking about a market’s ability to handle large trades without big moves in prices. But lately, that resiliency has practically vanished — and that’s a big worry.”
flow5 (2/26/07; 14:34:35MT – usagold.com msg#: 152672)
Suckers Rally
If gold doesn’t fall, then there’s a new paradigm.
============
Some people think Feb 27, 2007 started across the ocean. “On Feb. 28, Bernanke told the House Budget Committee he could see no single factor that caused the market’s pullback a day earlier”.
In fact, it was home grown. It was the seventh biggest one-day point drop ever for the Dow. On a percentage basis, the Dow lost about 3.3 percent – its biggest one-day percentage loss since March 2003.
Monetarism has never been tried.
9. September 2023 at 08:27
Rajat, I believe that 99% of China’s problems are self inflicted and 1% are due to the US. The same is true of Cuba. And Europe does a lot of trade and investment with Cuba:
https://en.wikipedia.org/wiki/Cuba%E2%80%93European_Union_relations#:~:text=The%20EU%20is%20Cuba's%20second,is%20Cuba's%20biggest%20external%20investor.
So no, I don’t agree with Chomsky. He’s spent his career making excuses for communist regimes.
Sean, It caused it outright. Yeah, some people borrowed too much. But that’s no reason for millions of people to take long vacations—work harder!!
Laura, Good points. And recall that those TARP loans were repaid despite the Fed letting NGDP crash. Imagine the bank balance sheets with sound monetary policy and 5% NGDP growth!
None of this had to happen.
10. September 2023 at 04:37
AD, or aggregate monetary purchasing power, equals M*Vt. N-gDp is a distilled subset and proxy of AD. “Raw materials, intermediate goods and labor costs, which comprise the bulk of business spending are not treated in N-gDp”.
Bankrupt-u-Bernanke conducted the most contractionary monetary policy of any Chairman since the Great Depression. M1 NSA money stock peaked on 12/27/2004 @ 1467.7. It didn’t exceed that # until 4 years later on 10/27/2008 @ 1514.2.
People point to M2’s growth, saying it was not tight. But those people don’t understand that banks don’t lend deposits. M2 is mud pie. It is an incontrovertible fact that all bank-held savings are frozen. This is the reason for Dr. Philip George’s “The Riddle of Money Finally Solved”.
http://www.philipji.com/riddle-of-money/
Savings aren’t synonymous with the money supply.
10. September 2023 at 04:57
Prior to and during the GFC, N-gDp was too low. Contrarywise, during C-19, N-gDp is too high. Housing prices fell during the GFC where the 2-year rate-of-change in base money fell. Housing prices are still rising after Powell’s rate hikes.
The composition of the money stock has changed, increasing AD. Gated deposits have fallen relative to transaction deposits increasing money velocity.
11. September 2023 at 03:04
Scott,
you seem to believe that a housing slump which causes the natural rate to collapse is perfectly normal behaviour? Count me sceptical.
I believe that housing slumps (absent external shocks like wars, etc.) are suspiciuos of bubble activity (and hence endogenous).
Not familiar with Erdmann’s work, will catch up. But reading the abstract of his Mercatus paper, I do not see how that refutes the bubble thesis. He explicitly states that there are locations where price increases were driven less by supply constraints, but by credit demand. Unsurprisingly, it is these that fell the most when monetary policy became tight. So not everything was a bubble – Looks bubbly to me…
From the abstact:
…There was a credit boom and bust, but, from 2002 to 2006, the credit boom was associated with rising prices more in locations where price changes associated with supply constraints were moderate. Tightened lending standards after 2007 created pro-cyclical collapsing home prices in moderately priced regions while not addressing the supply constraints that were responsible for the most excessive price increases…
11. September 2023 at 08:41
Viennacapital. The bubble claim I am referring to is the assertion that nationwide housing prices were clearly too high in 2006. In retrospect, that’s obviously not true. And there were also complaints that America was building too many houses, whereas the opposite is true.
As for the housing slump, markets go up and down for all sorts of reasons, including government policy changes. Fluctuating markets are certainly not proof of a “bubble”. But even if housing were a bubble, that would not cause high unemployment. The recession was caused by falling NGDP–tight money.
I would add that as 2008 progressed, more and more of the fall in the natural interest rate was feedback from falling NGDP expectations. The housing slump only explains the initial decline in the natural rate.
11. September 2023 at 21:30
I wouldn’t have commented on this particular post, but I saw Scott once again attacked Chomsky without any substance. He says: “Chomsky… makes excuses for communist regimes”.
This is the type of ad-hominem, ignoramus attack, that Scott is known for. If you try to discuss the substance of the Donbas conflict, he will scream: “putin lover.” If you discuss Trump’s policies he will scream: “Trumpista.” He’s part of this old, 1960’s, brainwashed, babybooming, degenerate generation that cannot engage in reasonable discourse.
For the record, and for those interested in reading books instead of watching Bucks games or old movies, Chomsky is an anarcho-syndicalist in the same mold as Rudolf Rocker.
Chomsky is not in favor of communist totalitarianism; unlike scott, he doesn’t write glowing artcles about the CCP.
He fully understands the threat of centralized power.
I’m not a fan of Rocker or Chomsky’s anarcho-syndicalism, but let’s focus on substance, not on ad-hominem idiocy. At least read a book before you comment.
Chomsky doesn’t “make excuses.” He advocates for decentralized, democratically organized community and corporate structures. It’s never been tried, and it would probably fail, but at least he’s thinking outside of the box. At least he’s not a globalist puppet, who meets once a year at a forum, and who calls himself “elite”.
He simply prefers Mikhail Bakunin’s socialist, worker party, which lost the debate to the marxists in the 1860’s.
12. September 2023 at 07:05
“Chomsky doesn’t “make excuses.””
LOL:
https://chomsky.info/19700813/
13. September 2023 at 11:57
The decrease in O/N RRPs increased liquidity. The increase in MMMFs increased liquidity (driven largely from bank-held savings). These two factors absorbed much of the Treasuries issuance. And that is the probable reason why Atlanta’s GDPNow is over 5%.
The increase in the demand for money was largely confined to saved DDs being shifted into bank CDs.
https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-30
14. September 2023 at 16:32
I’m going to make the bold statement that we are experiencing a deflationary event that is masked by lag effects and by the fact that currency valuations are relative to an ocean rather than a fixed horizon.
I quote, from a book from ancient Rome on agriculture of all things; where the author states that when large gold, silver and other forms of currency products returned to Rome from the wars that the interest rates paid would decrease.
When the wars were not very profitable, and the currency flows were restricted, the interest rates would rise.
This ancient Roman whose book I don’t have right in front of me and therefore cannot give a direct reference at this very moment, had the sensibility to understand what Bagehot would rediscover in his 1866 book; “Lombard Street” in that the interest rate is a reflection of the supply and demand curve of money.
I know we like to think we are in a modern time where the Federal Reserve controls this interest rate; but I question that considerably.
Assuming they control nothing; then a higher interest rate (which was foretold the Fed by the rising 2-year that preceded rate-hikes), means that we are a in a money starved environment.
High prices which we wrongly interpret as inflation is rather an increasingly smaller volume of data points that provide price discovery.
Just as with a stock market, when you have weakening volume and high prices, the investor quickly discovers that they hit a top and prices collapse and their investment reverts to the mean.
Right now home sales are at all time lows. Car sales are at all time lows.
No one is using their credit cards except what they absolutely must to survive.
The economic activity has ground to a halt due to a complete lack of money.
There is not an abundance of it. We do not have inflation.
We have high prices on low volumes. When inventories become a liability and get dumped on the market; it will be a tsunami of deflation.
14. September 2023 at 23:32
OMG. Is Scott preempting Kevin Erdmann without attribution? Let’s see. 1) “The Money Illusion: Market Monetarism, the Great Recession, and the Future of Monetary Policy – May 6, 2023 ” by SS 2) “Housing Was Undersupplied during the Great Housing Bubble” by Kevin Erdmann April 2018 (Mercatus Center), yes, Erdmann was five years prior to Sumner, 3) Nobelist Ben Bernanke thought the housing bubble was the cause of the Great Recession.
So, if Sumner doesn’t cite Erdmann at least once in his book, Sumner’s a fraud (I see Scott agrees with Kevin in the comments above, but that’s not my point, I want to see a citation in the book); and Bernanke won the Nobel Prize in economics, so his opinion cannot be easily dismissed. Let’s see how Sumner worms his way out of this one…possibly by ignoring me.
15. September 2023 at 10:09
Darth, “Car sales are at all time lows.”
Have you been taking some medication?
Ray, You said:
“So, if Sumner doesn’t cite Erdmann at least once in his book, Sumner’s a fraud”
Then I guess I’m not a fraud?
16. September 2023 at 05:58
re: “The Fed can boost reserve levels, but can’t force its members to lend, which is exactly what happened”
Hardly. The banks remained fully lent up from 1942 to July 2008, based on the truistic money multiplier, M1 / required reserves. The banks held an insignificant volume of excess reserve balances, excess legal lending capacity.
Until the remuneration of IBDDs, “pushing on a string” only applied prior to the nominal legal adherence to the fallacious “Real Bills Doctrine” when terminated in 1932 – due to a paucity of eligible (hopelessly impaired), commercial and agricultural paper for the 12 District Reserve bank’s discounting purposes.
16. September 2023 at 06:19
There wasn’t just a contraction in long-term money flows, the volume and velocity of money, the distributed lag effect in the proxy for inflation.
There was a sharp contraction in short-term money flows, the ex-ante proxy for R-gDp. The one / two punch’s combination built up to the failure of Lehman Bros. (“whose liquidity had evaporated overnight”)
Every recession since WWII was both predictable and preventable.
And We knew in advance, the precise “Minskey Moment” of the GFC:
POSTED: Dec 13 2007 06:55 PM |
The Commerce Department said retail sales in Oct 2007 increased by 1.2% over Oct 2006, & up a huge 6.3% from Nov 2006.
10/1/2007,,,,,,,-0.47 * temporary bottom
11/1/2007,,,,,,, 0.14
12/1/2007,,,,,,, 0.44
01/1/2008,,,,,,, 0.59
02/1/2008,,,,,,, 0.45
03/1/2008,,,,,,, 0.06
04/1/2008,,,,,,, 0.04
05/1/2008,,,,,,, 0.09
06/1/2008,,,,,,, 0.20
07/1/2008,,,,,,, 0.32 “peak roc”
08/1/2008,,,,,,, 0.15
09/1/2008,,,,,,, 0.00
10/1/2008,,,,,, -0.20 * possible recession
11/1/2008,,,,,, -0.10 * possible recession
12/1/2008,,,,,,, 0.10 * possible recession
RoC trajectory as predicted. Nothing has changed in > 100 + years
16. September 2023 at 06:32
To appraise the stance of monetary policy, you watch inside money (“means-of-payment” money), not outside money (reserves). “Reserves are still plentiful.”
https://files.stlouisfed.org/files/htdocs/publications/economic-synopses/2023/08/23/the-mechanics-of-fed-balance-sheet-normalization.pdf
17. September 2023 at 05:27
The FED’s Ph.Ds. don’t know a debit from a credit. MMMMFs shouldn’t be included in the money stock in the first place.
The MMMFs are nonbanks and customers of the DFIs.
See:
TOWARD A MORE MEANINGFUL STATISTICAL CONCEPT OF THE MONEY SUPPLY. Leland J. Pritchard Ph.D. Economics, Chicago 1933, M.S. Statistics, Syracuse
The drawdown of O/N RRPs increases market liquidity.
17. September 2023 at 06:47
How do you think the TGA was funded?