Where are all the bears now?

[white_goodman]

A piece showing differences between Bernanke the Chairman and Bernanke as the academic

http://thefaintofheart.wordpress.com/2013/05/10/bernanke-has-not-listened-to-bernanke/

How are those big short positions going Festivus?

 

[Uncle Festivus]

A piece showing differences between Bernanke the Chairman and Bernanke as the academic

http://thefaintofheart.wordpress.com/2013/05/10/bernanke-has-not-listened-to-bernanke/

How are those big short positions going Festivus?

Looks like lunch at Maccas today......

 

[Uncle Festivus]

Some excellent data prints today. So was someone talking about ending QE this year because of the 'recovery'?

 

[Uncle Festivus]

A piece showing differences between Bernanke the Chairman and Bernanke as the academic

http://thefaintofheart.wordpress.com/2013/05/10/bernanke-has-not-listened-to-bernanke/

How are those big short positions going Festivus?

Mmmmm....KFC today

 

[Tyler Durden]

Not sure if you're trying to say Macca's/KFC is cheap........or expensive.

 

[white_goodman]

Some excellent data prints today. So was someone talking about ending QE this year because of the 'recovery'?

Evans Rule

http://au.businessinsider.com/fed-announces-evans-rule-2012-12

 

[white_goodman]

Mmmmm....KFC today

wow looks pro..

 

[Uncle Festivus]

Evans Rule

http://au.businessinsider.com/fed-announces-evans-rule-2012-12

Just have to ensure that the entity you base the rule(s) on is calculated correctly?

Walking, walking........

"The Fed is now linking future monetary policy moves to hard economic thresholds on unemployment and inflation."

......and stop.

 

[white_goodman]

Just have to ensure that the entity you base the rule(s) on is calculated correctly?

Walking, walking........

"The Fed is now linking future monetary policy moves to hard economic thresholds on unemployment and inflation."

......and stop.

you could throw in the calcs for just about every macro aggregation... they are all wrong in many aspects, but that doesnt mean anything... when those numbers are reached itll give you a guide on Fed Policy...

You seem to be stuck in a mind frame of what the world should be, not what is...The Fed is a bad performer for the past 100 years and is easy to critique, still basing decisions on what they should be doing or what would happen in an ideal world isnt anything to work from, work on what they will do and are doing..

 

[white_goodman]

heres a good video on the market monetarist view of present situation..

 

[Trembling Hand]

heres a good video on the market monetarist view of present situation..

Very interesting. Would love to hear a rebuttal from the Bears.........

 

[Uncle Festivus]

Very interesting. Would love to hear a rebuttal from the Bears.........

Stuffing Yen in yield holes?

Bad

On Monday, Japanese yields moved higher even as the BOJ scooped up ¥1.2 trillion of JGBs maturing in one to 10 years at three separate operations””exactly the opposite effect the BOJ had been hoping for, strategists said.

With liquidity deteriorating, "a risk-free investment has now become risky," said Manabu Tamaru, senior investment manager at Baring Asset Management (Japan). "Thus investors are demanding a risk premium under the BOJ's buying program."

FONT=Comic Sans MS



Good

Though yields fell, politicians and bond investors chalked up the overall rise in rates to a brighter economic outlook pushing money out of safe-haven sovereign debt. Japan posted a 3.5% increase in gross domestic product for the first three months of the year, government data showed Thursday, far outpacing its industrialized peers.

"When money begins to move, then you've got to be resigned to the fact that there's no choice but for JGB yields to rise" as the economy recovers, Finance Minister Taro Aso said in Parliament Thursday, adding that some investors were likely selling bonds to buy stocks.

The Bank of Japan currently is buying more than ¥7 trillion of government bonds per month, equal to more than 70% of new issuance.

 

[FlyingFox]

heres a good video on the market monetarist view of present situation..

Great video. Thanks! A lot of interesting points brought up and I like the idea of nominal GDP targeting is really good.

However there were some issues brought up that are perhaps more interesting.

Personally targeting is great when you have an underlying trend is maintained because of demand. The targeting helps smooth out kinks in the supply or demand and nominal GDP is arguably a better way to target.

However what happens when there is a change from the status quo, when the economy is transitioning? Should we stick to targeting?

Granted that the lack of stimulus is bad. But more thought should be given to the fact that these models and targets where developed at a different time. The last century or century and a half has been completely different to anything else prior and possibly anything else in the future.

If the underlying macros are changing, is it not more prudent to try and get to the new normal than just try and keep to targets developed in boom times?

 

[white_goodman]

However what happens when there is a change from the status quo, when the economy is transitioning? Should we stick to targeting?

it should be important to not theres a a massive difference to a target and a level target... level targeting means doing more or less to keep on a fairly linear target of NGDP growth, our current inflation 'target' has no implication for the next year or the previous period (ie catch ups or slow downs)..

there are adjustments theoretically regarding NGDP relative to rates of business/personal taxation and a move towards growth of nominal wage targeting... the theory isnt 100% fleshed out its largely been developed in the blogosphere and is outpacing the peer review academic process.. which is pretty cool in a way. The term Market Monetarism was only coined by Lars Christensen in 2011, so yeah its got some ways to go before making its way full into academia/policy. In saying the former head of Bank of Canada and future BOE govern or Carney is all for it..
the arguement on where to start the level target from is up for debate but isnt overally crucial moving forward as long as there is some level target, and you can't really have a flexible target that is changed arbitrarily, sort of defeats the purpose in terms of guidance and expectations.. When there are real productivity gains you will see low inflation all else being equal and vice versa... we are getting a quasi experiment in Japan atm, which future Fed chairwoman Romer has commented on being most interesting in terms of the macro space atm... good news ahead if it seemingly works in Japan, as uncle festivus has shown above (higher rates are a good thing), and other indicators are showing much better economic numbers filtering out. Who would have thought the Keynesian magic bullet of fiscal policy might finally be shelved

 

[white_goodman]

The Bank of Japan currently is buying more than ¥7 trillion of government bonds per month, equal to more than 70% of new issuance.

we are in Abenomics now, I dont see what you are trying to suggest other than a gotcha that isnt a gotcha?

the monetarist theory of increasing HPM or the CB balance sheet = hyperinflation, is an idea stuck in the middle ages... despite how good the economist who thought it up was, the ultra tight MP of the past 20 years in Japan is hopefully over, for their sake, only cost them 200% in debt/GDP to figure it out

 

[FlyingFox]

it should be important to not theres a a massive difference to a target and a level target... level targeting means doing more or less to keep on a fairly linear target of NGDP growth, our current inflation 'target' has no implication for the next year or the previous period (ie catch ups or slow downs)..

there are adjustments theoretically regarding NGDP relative to rates of business/personal taxation and a move towards growth of nominal wage targeting... the theory isnt 100% fleshed out its largely been developed in the blogosphere and is outpacing the peer review academic process.. which is pretty cool in a way. The term Market Monetarism was only coined by Lars Christensen in 2011, so yeah its got some ways to go before making its way full into academia/policy. In saying the former head of Bank of Canada and future BOE govern or Carney is all for it..
the arguement on where to start the level target from is up for debate but isnt overally crucial moving forward as long as there is some level target, and you can't really have a flexible target that is changed arbitrarily, sort of defeats the purpose in terms of guidance and expectations.. When there are real productivity gains you will see low inflation all else being equal and vice versa... we are getting a quasi experiment in Japan atm, which future Fed chairwoman Romer has commented on being most interesting in terms of the macro space atm... good news ahead if it seemingly works in Japan, as uncle festivus has shown above (higher rates are a good thing), and other indicators are showing much better economic numbers filtering out. Who would have thought the Keynesian magic bullet of fiscal policy might finally be shelved

Interesting. What happens when you have a productivity fall for example due to the rebalancing of age distributions eg. in Japan and Italy?

 

[white_goodman]

Interesting. What happens when you have a productivity fall for example due to the rebalancing of age distributions eg. in Japan and Italy?

all else being equal to get to your trend target it must be made of real growth in output and growth in the price level(inflation), less of one means more of the other. There are feasible tweaks to the level target with relative tax rates, population growth and nominal wage growth, but im only in my infancy upon reading it..

Sumners blog and Marco Nunes are probably the best imo

 

[Uncle Festivus]

we are in Abenomics now, I dont see what you are trying to suggest other than a gotcha that isnt a gotcha?

the monetarist theory of increasing HPM or the CB balance sheet = hyperinflation, is an idea stuck in the middle ages... despite how good the economist who thought it up was, the ultra tight MP of the past 20 years in Japan is hopefully over, for their sake, only cost them 200% in debt/GDP to figure it out

What's a gotcha?

Only get goods inflation if monetary inflation escapes? Looks like the difference between the US & Japan - Japan making a mess of it if they can't "control" it?

Last nights data response = not efficient markets?

Quiz - which yield bubble?

 

[white_goodman]

Last nights data response = not efficient markets?

what data? the JGB yields are up hence bond prices down despite BOJ purchases?

thats the point..

higher yields mean better growth prospects for Japanese economy

is your objection that the stimulus is working? or that its working too well and they wont ever step off the gas, which is another argument that I can agree with in many ways..

 

[FlyingFox]

all else being equal to get to your trend target it must be made of real growth in output and growth in the price level(inflation), less of one means more of the other. There are feasible tweaks to the level target with relative tax rates, population growth and nominal wage growth, but im only in my infancy upon reading it..

Sumners blog and Marco Nunes are probably the best imo

I agree with what you are saying. I am not disputing the mechanisms but rather the reasons behind the mechanism. At steady state of output (say population growth and productivity growth are relatively constant and positive and the population composition is relatively constant), the targeting works great. Say a nominal GDP target of 5% is chosen with 3% output and 2% inflation.

If you then try and use this target at a point where the output trend reverse (population decreases or change in composition or productivity decreases) than inflation all of a sudden needs to make a larger component. (output=0%, inflation = 5%; output = -2%, inflation=7%). See where this is heading?

While inflation targeting under shoots, nominal GDP targeting will, at least in theory result in strong inflation in these situations (assume you can get the money flowing).

Obviously due to the debt levels, personal and sovereign, this is the desired result. I can see the Japanese policies are trying to do this, directly or indirectly but at what cost?