Is the US economy in recession?

[DinoDoc]

Why is it a stupid question? What do you think are the bad effects of QE?

Just because isn't a sound reason to enact governmental or monetary policy. If a reason for an action can not be given and the only response someone can give is, "Why shouldn't we?" it says something about either the value of the policy or the intellect of the person making the quip.

[Hauldren Collider]

What the fvck do people who blame Obama for the economy want him to do, then?

Repeal the healthcare bill and other immense regulations and intrusions into the private market? Cut government spending and stop crowding out private investment? Reform medicare and medicaid to stop wasting billions (trillions?) of dollars of wealth on useless endeavors? Actually pass a budget and reduce the uncertainty surrounding the US debt situation?

Or he could write up random subsidies to political allies and label it a "jobs bill" so credulous idiots like yourself will assume he's actually doing something useful.

[giblets]

Just because isn't a sound reason to enact governmental or monetary policy. If a reason for an action can not be given and the only response someone can give is, "Why shouldn't we?" it says something about either the value of the policy or the intellect of the person making the quip.

That wasn't the only response. There are perfectly good reasons to think the policy is beneficial and I pointed out that no one has provided a good reason to think it will hurt. Why don't you try using your brain for five seconds.

[rah]

What the fvck do people who blame Obama for the economy want him to do, then?

Fix it

[Kuciwalker]

What the fvck do people who blame Obama for the economy want him to do, then?

Cut employer-side payroll taxes, not employee-side (though we are years late on that one; it would have been most valuable as part of the ARRA).

Not create large additional per-employee costs (especially on the low end) with Obamacare.

Stop dicking around with major infrastructure investments like the Keystone XL pipeline just to score points with his environmentalist supporters.

Not raise the minimum wage 25%.

End extended unemployment benefits.

Those would all be a start.

edit: "get a clue about aggregate demand management" would be idea, but I'm not going to call him out on that one while over half of the Federal Reserve Board still flunks it

[Jaguar]

Just because isn't a sound reason to enact governmental or monetary policy. If a reason for an action can not be given and the only response someone can give is, "Why shouldn't we?" it says something about either the value of the policy or the intellect of the person making the quip.

It's not the only response I can give, but I was wondering whether you perceive actual harm from the policy first.

We can define NGDP = MV. M, the quantity of dollars, times V, the number of times each dollar changes hands per year.

We have substantial empirical and theoretical reason to believe that expected expansions of M compel V to rise as well. The theoretical reasoning is that if you expect lots more dollars to be circulated soon, you want to get rid of them more quickly because you worry a bit more about them holding their value. The empirical data tends to back this up.

We therefore think that an expected (or actual) expansion of M should increase V, or at least, certainly not reduce it. If we believe this so far, then we believe QE increases nominal GDP.

Nominal GDP can increase in two different ways: higher nominal earnings to the already-employed, or new jobs for the unemployed. There's substantial empirical and theoretical reason to believe that - when you have many people unemployed - the new spending goes towards hiring new people.

[DinoDoc]

It's not the only response I can give, but I was wondering whether you perceive actual harm from the policy first.

Given the securities the Fed has chosen to buy, I'm simply unsure how much of an effect it can actually have as it seems unlikely to stimulate huge numbers of homeowners to refi or help solve the over supply in the housing market given that lenders are already operating at full capacity given the increased credit standards after the housing collapse. It also seems unlikely to have much of an effect given a) the sporadic nature of these events and b) how unclear The Fed is in its goals.

Edit: This seems like a more sound policy given the failiure thus far of Bernank's approach.

[Jaguar]

Given the securities the Fed has chosen to buy, I'm simply unsure how much of an effect it can actually have as it seems unlikely to stimulate huge numbers of homeowners to refi or help solve the over supply in the housing market given that lenders are already operating at full capacity given the increased credit standards after the housing collapse.

While housing was an essential part of the original financial crisis, I think it's better to think about things in terms of the labor market at this point.

It also seems unlikely to have much of an effect given a) the sporadic nature of these events and b) how unclear The Fed is in its goals.

I agree with this. The Fed would perform better if it had a consistent policy with clear goals.

[Kuciwalker]

DD: the short version is that we don't actually expect QE to do anything directly; I see it as a signal of future Fed intentions (partly just by reflecting the balance of power between hawks and doves).

If the Fed announced negative QE tomorrow of $1bn/month and promised that this would continue until NGDP hit the level path it departed in 2008, I would expect that policy to be wildly successful. The reason is that the monetary base is already bloated, so much that everyone knows it will become much, much smaller after we start to see real recovery. "Negative QE" of the form I just described would more or less lock in the current size of the Fed's balance sheet until recovery was complete.

[Jaguar]

Edit: This seems like a more sound policy given the failiure thus far of Bernank's approach.

Yes.

[Jaguar]

Unfortunately, though, we don't get that, so instead we have to do tea-leaves reading to figure out what The Bernank's intended policy is, and then we have to make really complicated macroeconomic models to explain it.

[Hauldren Collider]

So basically, the economy would be better if we hooked The Ben Bernank up to a machine to figure out what the **** he's thinking?

[Kuciwalker]

Edit: This seems like a more sound policy given the failiure thus far of Bernank's approach.

Yes. In fact, it's because of the author of that article that Jaguar and I believe what we are saying in this thread. (Scott Sumner has written a number of other articles on the subject and has a blog where he's covered it almost exclusively for the past three or four years.)

[Kidlicious]

When they find a job that doesn't involve the government, yes, yes, they do. Or are you arguing that 60 percent of the federal bureaucracy are in fact, unemployable in the private sector?

You just don't put reality into your thinking. Yes, it's well known that people who get laid off or fired during a recession have difficulty finding work that pays the same or any work at all for that matter. Why do you hate reality Ben?

[Kidlicious]

Preferably with a monetary stimulus, but we don't see Bernanke getting enough done.

That's because monetary policy can't get you out of a recession like this without proper fiscal policy.