The U.S. Economy and Jobs Thread, or...

[giblets]

Okay, it seems like your point is that if the Fed could create hyperinflation, then achieving core inflation of 2-3% must also be possible. I don't see what is so self-evident about this. I also don't see how the Fed buying assets and Congress deciding to borrow more money and spend it are the exact same thing just because they normally both increase aggregate demand.

[Kuciwalker]

Okay, it seems like your point is that if the Fed could create hyperinflation, then achieving core inflation of 2-3% must also be possible. I don't see what is so self-evident about this.

Intermediate value theorem.

[KrazyHorse]

You believe that inflation (importantly, inflation expectations) are a non continuous function of the size of the intervention?

[KrazyHorse]

Intermediate value theorem.

**** you.

[giblets]

You believe that inflation (importantly, inflation expectations) are a non continuous function of the size of the intervention?

I can see how buying bonds and burning them could drastically change inflation expectations, but I don't see how simply buying bonds would necessarily do that, because people expect the Fed to sell them again once inflation picks up.

[KrazyHorse]

Please reread what I wrote.

[giblets]

What's the proper measure of the stance of monetary policy? Money supply? edit: some measure of inflation expectations?

[Kuciwalker]

Expectations of the nominal target (price level, NGDP, whatever).

[KrazyHorse]

Sumner-Kuci-KH consensus.

[KrazyHorse]

I can see how buying bonds and burning them could drastically change inflation expectations, but I don't see how simply buying bonds would necessarily do that, because people expect the Fed to sell them again once inflation picks up.

By the way, this is quite a sophisticated objection (not to my suggestion to create inflation, but to bond buying alone), popularized (?) by Krugman as the "expectations trap". However, I believe that recent experience has shown that both inflation expectations (via the TIPS spread, say) as well as NGDP expectations (proxied to equity prices) reacted quite strongly to QEI and QEII (as markets came to expect them, not when they actually occurred, of course). These were even weaker actions than direct bond buying. The Fed CAN credibly commit to increasing NGDP/inflation. It has simply chosen not to do so (in all likelihood due to the influence of a small number of massively incompetent and ignorant regional governors).

I seriously hope the last dozen or so responses have taught you something, gribbler. You have the capacity to learn when you are not being deliberately obtuse.

[giblets]

Do you have good graphs of inflation expectations? I did a Google search and found this:
http://macroblog.typepad.com/.a/6a00...c062970b-popup
Looks like you're right, and QE2 did increase expectations.

[KrazyHorse]

I have a ****load of good graphs on this and many other market variables. I simply can't share them with you or anybody else on this forum.

[DaShi]

You can share them with me. I'm trustworthy.