Over at Equitable Growth: It is always instructive to look at the materials that the Federal Reserve's Federal Open Market Committee pumps out, especially their semi-anonymized (hi, Charlie Evans, with your 3% longer-run value) estimates of what the appropriate federal funds rate would be.
Thus we can see, comparing January 2012 when the Federal Reserve began publishing its dot-plots to today, the Federal Reserve collectively and slowly come to recognize current reality. Back at the start of 2012 the FOMC participants all thought that in the "longer run"--which at the beginning of 2012 I take to be next year, 2016--the federal funds rate ought to be back at its normal mid-expansion level, which they all took to be in the 3.75%-4.5% per year range. Today, of course, only one participant (Charles Plosser?) still thinks the federal funds rate ought to be in that range next year, and at the very bottom of it. READ MOAR
Over at Equitable Growth: A question I will never ask any Federal Reserve policymakers— not in public, not in private. They do not need their elbows jiggled in this way: The decision by the Federal Reserve in the mid-1990s to settle on a 2% per year target inflation rate depended on three facts — or, rather, on three things that were presumed to be facts back in the mid-1990s: READ MOAR
Over at Equitable Growth: Fixed: "Beginning the normalization of policy will be a significant step toward the
restoration entrenchment of... normal abnormal dynamics
...However it is widely expected that the rate will lift off before the end of this year, as the normalization of monetary policy gets underway. The approach of liftoff reflects the significant progress we have made toward our objectives of maximum employment and price stability. The extraordinary monetary policy accommodation that the Federal Reserve has undertaken in response to the crisis has contributed importantly to the economic recovery, though the recovery has taken longer than we expected. The unemployment rate, at 5.5 percent in February, is nearing estimates of its natural rate, and we expect that inflation will gradually rise toward the Fed's target of 2 percent. Beginning the normalization of policy will be a significant step toward the restoration of the economy's normal dynamics, allowing monetary policy to respond to shocks without recourse to unconventional tools... READ MOAR
As I have said (often), I am on Mian and Sufi's side of this argument. But Dean Baker is not without points on his side: "What would our saving rate be if we didn't have [a] debt [overhang]?"
Dean Baker: Question for Brad DeLong and the Debt School of the Downturn: What Would Our Saving Rate Be If We Didn't Have Debt?: "Brad DeLong tells us that he is moving away from the cult of the financial crisis...
Today's Must-Must-Read: This is an important point that is worth saying as often as necessary--perhaps as often as possible:
Over at Medium: Bull Market: WRITTEN IN RESPONSE TO: [Bedtime for market efficiency](Bedtime for market efficiency)
The last time I saw Richard Thaler speak, he talked about the “Beauty Contest” game. In the “Beauty Contest” game, a bunch of people each pick a number between 0 and 100. The winner is the person whose number is closest to 2/3 of the average. And he talked about the person who, when he proposed to try the game on a group of alumni at a development function, advised him not to: it would be boring because everyone would choose zero.
...dressed in my TV-from-the-Princeton-studio uniform: dress shirt, jacket, tie, shorts, and sandals (the camera doesn’t pan below the belly button). With me, Andy Serwer of Fortune and Stephen Moore of the WSJ.
...The Federal Reserve Banks would open on Saturday so that member banks of the Federal Reserve System could open on Monday. A reporter asked if the banks would be open ‘[a]ll along the line, Mr. President; that is, all functions?’ Roosevelt replied, ‘Yes, all functions. Except, of course, as to gold. That is a different thing. I am keeping my finger on gold.’
The kha-khan Cosma Shalizi smacks me down for seeing the Federal Reserve as afflicted by intellectual errors, rather than as a prisoner of Gramscian top 0.1% hegemony and the revolving door.
He has a point, a definite point.
In a good world the Janet Yellens and the Charles Evanses would be the vital center of the Federal Reserve, not its left wing. And they would be acting as its left wing, pointing out the manifold benefits of labor-force upgrading in a high-pressure economy, the extraordinary quiescence of core inflation, and the continued overoptimism of the Fed model. READ MOAR
Over at Equitable Growth: Adding to a point made in In Lieu of a Focus Post: March 2, 2015 (Brad DeLong's Grasping Reality...):
We analyze time series of investor expectations of future stock market returns from six data sources between 1963 and 2011. The six measures of expectations are highly positively correlated with each other, as well as with past stock returns and with the level of the stock market. However, investor expectations are strongly negatively correlated with model-based expected returns. The evidence is not consistent with rational expectations representative investor models of returns.
Daily Economic History: From George Dangerfield: The Era of Good Feelings:
Indeed, when one attempts to restore [Chief Justice John Marshall] to the context of his times, it becomes exceedingly—difficult to separate the business—minded judge from the nationalist statesman.... In his decision on the case of Gibbons v. Ogden, Marshall struck down a steamboat monopoly, and did as much as any single man could do to make the steamboat free upon the western rivers; and the steamboat was not merely an essential factor in the development of the internal market, it was also the very symbol of democracy.... He gained much popularity from his decision, and he might have established the “dormant” power of the commerce clause—that is to say, its implicit veto upon state legislation—without too much disagreement from the rest of the Court. Instead, he merely suggested—and in terms that may have been deliberately confused—the existence of the dormant power.... “We must never forget,” he once said, “that it is a constitution we are expounding...” something organic, capable of growth, susceptible to change....
Over at Equitable Growth: Vir illustris Martin Feldstein starts by saying: downward nominal price stickiness is such a thing that we do not have to worry about deflationary spirals in consumer prices. I agree. But I do not understand where his argument ends up:
...is forced to concern himself with the anticipation of impending changes, in the news or in the atmosphere, of the kind by which experience shows that the mass psychology of the market is most influenced. This is the inevitable result of investment markets organised with a view to so-called ‘liquidity’.
Live from La Farine: Izabella Kaminska: "How Nuts Are Markets When the Most Reasonable Analysis of an Asset Class Pumped by the Great and Good in Tech Is a Parody Sub-Reddit Entitled 'Buttcoin'?"
I missed this when it went by last September...
BitCoin's blockchain: wonderful, promising innovation in distributed trustworthy computing. BitCoin: not a safe liquid store of value--hence unlikely to be a durable unit of account, or even medium of exchange...
Live from the Roasterie: For those who missed this last fall...
Paul Krugman on Allan H. Meltzer:
...when you look at the pronouncements of seemingly reputable economists. In May 2009, Allan Meltzer, a well-known monetary economist and historian of the Federal Reserve, had an Op-Ed article published in The New York Times warning that a sharp rise in inflation was imminent unless the Fed changed course...
Over at Equitable Growth: I see that the femina spectabilis Diane Lim is a very unhappy camper:
...‘Critical investments’ and ‘shared prosperity’ are ‘in.’ Deficits are down to an economically sustainable range.... Our policymakers are no doubt relieved to take a break from having to talk about the hard stuff (spending cuts and tax increases) and getting to focus on the nice-sounding stuff (spending increases and tax cuts).... Dismissing fiscal responsibility as a socially irresponsible idea is irresponsible.... READ MOAR
Brad DeLong, Roger Ibbotson, Ben Inker, Kevin Kliesen, Sallie Krawcheck, and Richard Thaler to present.
CHICAGO, Feb. 17, 2015 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced the agenda for the Morningstar Institutional Conference taking place March 5-6 at the JW Marriott Desert Ridge Resort & Spa in Phoenix, Arizona. The conference, formerly the Morningstar Ibbotson Conference, is Morningstar's premier event for institutional investors and wealth managers featuring thought leaders from academic institutions, the financial services industry, and Morningstar. Attendees will discuss current investment trends, the latest portfolio strategies, and perspectives on the U.S. and global economies.
Morningstar is pleased to welcome back Richard H. Thaler, the Ralph and Dorothy Keller Distinguished Service Professor of behavioral science and economics at the University of Chicago Booth School of Business. Thaler will discuss how investor behavior affects retirement plan design and how to apply behavioral principles to money management.
It is Eric Rauchway in the Times Literary Supplement. My only complaints about the review are:
It was more than just the desire of rapidly-growing emerging markets not to find themselves under the hammer of a 1998 that produced the global savings glut. It was increased income inequality in the North Atlantic core, plus increased wealth in the periphery seeking a North Atlantic bolthole as a form of political risk insurance as well and in addition.
Although Keynes argued that deflation was worse than inflation, he sought to avoid both rather than lean on the inflation side.
Keynes did not win at Bretton Woods: Bretton Woods did not mandate symmetrical adjustment. Keynes's victory was partial, and for the most part came after his death: policy during his life was hardly Keynesian.
Summers served Obama; Summers's preferred policies were not adopted by Obama. But that failure was by no means written in the stars. It was contingent--depending on both a Treasury Secretary and senior political advisors who did not understand the situation and on Obama's imprinting on them rather than on Summers. It was a near-run thing, in the United States at least. A much better world is only a butterfly wing-flap away on some alternative quantum frequency of the multiverse.
Here it is:
Eric Rauchway: Debt Piled Up: "Martin Wolf THE SHIFTS AND THE SHOCKS: What we’ve learned--and still have to learn--from the financial crisis. 496pp. Allen Lane. £25. 978 1 84614 697 8 Published: 29 December 2014:
Over the course of his new book on the current economic unpleasantness, Martin Wolf conveys a sense of increasing frustration. He begins with a sober account of recent history and a capsule proposal for how to solve the malaise with which we are confronted, and then begins to evaluate competing accounts and proposed solutions, often with a single word. Here is a non-exhaustive list of those words: nonsensical, simplistic, mistaken, childish, asinine, self-refuting, nonsense, silly, insouciant and grotesquely dangerous, and--most frequently--wrong (at least once, totally so).
People have been asking me about this recently, and I keep thinking it is a set of issues I should revisit, reconsider, expand, and write about at length. But I have failed to do so.
So here it is again, hoisted from the archives:
The first school of thought, broadly that of the United States’ Republican Party, was that financial regulation was bad because all regulation was bad. The second, broadly that of the Democratic Party, was somewhat more complicated, and was based on four observations:
Sokrates Son of Sophroniskos: You are out of your century, and out of your country...
Titus Pomponius Atticus: I claim this to be my country, and here by the docks of the Piraeus to be my place. I am not called "Atticus" for nothing, you know...
Axiothea: Why are you called "Atticus"? It doesn't sound like a very Roman name...
Atticus: I made it up. My father had only two names--good old Titus Pomponius, no claims to triple-barreled noble senatorial-class names he, just an equestrian.
J. Bradford DeLong :: U.C. Berkeley
OëNB Conference on European Economic Integration :: Vienna :: November 24-25, 2014
There is an important purpose of an opening keynote talk like this one. Its task is to start from first principles and then give a large-scale bird's-eye overview to what is to come. We have panels to come on monetary policy, balance-sheet adjustment and growth, inequality and its role in generating internal macroeconomic imbalances, external macroeconomic rebalancing, and banking sector regulation. They all presuppose that Europe, and within it the regions of Central, Eastern, and Southeastern Europe that we focus on here, need not just higher aggregate demand in the short-term but more. They need large-scale sectoral rebalancing. And that sectoral rebalancing needs to be rapid. Why? Because these economies will not grow smoothly without deep structural reforms--in these reforms need to be not just at the bottom but at the top, reforms of institutions, governance structures, and regulatory practices and mandates need to be carried out as well.
Over at Project Syndicate: For a while the best book on the macroeconomic catastrophe that struck the North Atlantic starting in 2007 was Gary Gorton's Slapped by the Invisible Hand. Them for a while the best book was Alan Blinder's After the Music Stopped. Now these have been superseded by two: the extremely-observant sensible Tory Martin Wolf's The Shifts and the Shocks; and my friend, patron, teacher, and (until the last reshuffle) office neighbor Barry Eichengreen 's Hall of Mirrors. Read and grasp the messages of both of these, and you are in the top 0.001% of the world in terms of understanding what has happened to us--and what the likely scenarios are for what comes next.
I have a very easy time believing that debt overhangs--private, international, and public--can be enormous headwinds and exert substantial drag on growth and recovery. What I cannot understand is how debt can do so without also being an impaired asset to those who hold it. Debt that is painful enough to bear that it discourages enterprise and spending is also debt that may not be collected in the end, and thus debt that sells at a low price and carries a high face interest rate.
My problem this morning is that I have four starting points. Or maybe my problem is that I have five starting points:
I. A Little Dutch History
My first starting point is the history of the Netherlands.
I would have to be more rash indeed than the fifteenth century's Charles de Valois-Burgogne,2 the last sovereign Duke of Burgundy, to dare to opine about classical Dutch history with Jan de Vries in the room. But my read of it tells me that "political union" is a very vague and sketchy concept indeed. Consider the "political union" of what was surely the strongest power in seventeenth-century Western Europe: the seven United Provinces of the Netherlands that dominated the economy and were the political-military lynchpin of the coalition to contain the aggressive King Louis XIV Bourbon of France. READ MOAR
J. Bradford DeLong on January 26, 2015 at 10:49 AM in Economics: Finance, Economics: History, Economics: Macro, History, Long Form, Philosophy: Moral, Political Economy, Politics, Streams: Economics, Streams: Equitable Growth, Streams: Highlighted, Streams: The Honest Broker | Permalink | Comments (8)
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Over at Equitable Growth: From my perspective, QE has always seemed to me to be likely to be:
First, "secular stagnation" was a bad phrase for Larry Summers to have chosen to label what he wants to talk about. It is true that it was the phrase used by Alvin Hansen when he worried about a very similar thing at the end of the 1930s. And it is true that the root cause of what worried Hansen was his fear that technological progress had reached its culmination point--hence that future high return investments would be scarce. But what Hansen and Summers both worry about is not the absence of rapid technological progress per se. READ MOAR
Over at Equitable Growth: In my view, the best way to understand what has happened to the U.S. bond market over the past six months is this:
The bond market has continued to believe the four things it started believing in mid-2013, at the time of the taper tantrum:
And over the past six months the bond market has come to believe READ MOAR
Septima: My good friend Omar, whom I love so dearly! You just ran into that tree!
Axiothea: And why are you walking about muttering to yourself with your eyes glued not to the beautiful mountain afternoon but to your smartphone?
Omar Khayyam: THAR SHE BLOWS! THREE POINTS OFF THE LARBOARD BOW!! IT'S THE BERNE WHALE!!!
Over at Equitable Growth: The very sharp John Plender makes what is now the standard--but I believe incoherent--argument that central banks are doing bad things with quantitative easing and need to reverse it and raise interest rates. They need to do so, Plender thinks, even though doing so will reduce spending, raise unemployment, put downward pressure on wages and prices, and increase risk in a world that still appears to be grossly short of risk bearing capacity. So it is natural to ask: "Why?" What is the upside supposed to be? Is there an upside aside from believing that this will make it easier for investment managers to report black rather than red numbers to their clients while still holding safe Treasury bond-based portfolios?
That Plender's argument is incoherent is, I think, demonstrated by the fact that markets do not respond as he thinks he should--he saw the end of large-scale US QE coming at the start of 2013, and confidently predicted a fall in US Treasury bond prices that simply has not happened. READ MOAR
The way I see it is this: The root problem is an inability of financial intermediaries to stand behind or to credibly assess risks, and so a reluctance on the part of investors to provide the factor of production of risk-bearing to the marketplace. Pushing safe interest rates way, way, way down and then pushing the supply of risk-free assets that the private sector can hold way, way, way down provides a form of Dutch courage to otherwise reluctant investors: even though they don't trust financial intermediaries' risk assessments, the low rates on and low volumes of safe assets give them no alternative. The long-run problems are twofold: First, safe interest rates expected to be very low for a long time artificially boost the value of long-duration assets--so capital is misallocated and we wind up with a capital structure that has in it too many long-duration relatively-safe projects that make at best very small contributions to societal well-being. Second, the demand for risky assets just generated is not a well-based demand for soundly-analyzed risks but rather for any priced risk at all--so the market becomes vulnerable to Ponzi and near-Ponzi finance.
From my point of view, however, the proposed cure of higher unemployment, lower demand, and greater fundamental risk from continued and deeper depression is worse than the disease. First best would be fixing the credit channel so that financial intermediaries would be able to stand behind risks they have credibly assessed. Second best is having the government take over and be a financial intermediary--have it borrow and spend, accepting that its spending will to a certain degree follow a political logic of greasing powerful and squeaky wheels more than amplifying wealth. Third best is continuing QE. Worst is attempting to revert to normal interest rates without financial policy to fix the credit channel or fiscal policy to maintain demand near normal-employment levels.
...at the turn of the year was a salutary reminder of how hard it is to invest in markets that are heavily distorted by central banks. At the start of 2013 there was near-consensus among investors that US Treasury yields had nowhere to go but up.... The US Federal Reserve did indeed stop buying in the summer, but Treasury prices continued to rise and yields to fall. The most plausible explanation for this defiance of conventional wisdom was the persistence of global imbalances... excess savings in Asia and northern Europe had to find a home. The additional yield available in the US market, along with the potential for further dollar strength, made this a compelling trade.... Central banks, most notably the Fed, have put a cushion under asset prices when they go down while imposing no cap when they bubble up.... The great bond bull market that began in 1982 has yet to revert.... Market professionals who have hitherto contributed to the efficiency of market pricing through their analytical skills are reduced to hanging sheeplike on the words of central bankers about the likely direction of bond-buying programmes. And they remain bewitched by the mandarins of central banking despite the mixed quality of their forward guidance.... Whatever the benefits of QE, there are bound to be significant economic costs arising from the artificially cheap cost of capital. Capital will be misallocated. And it may go on being misallocated, for the central banks seem to be trapped in a process whereby measures to counteract the fallout from one bubble pave the way for another.
Comment on: Janice Eberly and Arvind Krishnamurthy: [Efficient Credit Policies in a Housing Debt Crisis](http://www.brookings.edu/~/media/projects/bpea/fall 2014/fall2014bpea_eberly_krishnamurthy.pdf):
Very nicely done by the very sharp Janice Eberly and Arvind Krishnamurthy, yet after reading it I am more mystified than I was before. I am more mystified that conforming-refinancing loans with equity kickers were not offered to all underwater and above-water homeowners alike. I am mystified that, instead, the debt overhang was removed via foreclosures and some case-by-case renegotiations. It was brutal, as discussant Paul Willen had acknowledged, and it is not clear that it is over yet. Even though during the housing bubble a million single-family homes above trend were being built each year, since 2007 the annual total has dropped to half a million, far below the long-run trend of 1.2 million.
Now the country is 4 million single-family homes short based on pre-housing-bubble trends. That translates into 4 million families living in makeshift situations--primarly their relatives’ basements and attics. Yet, strangely, this enormous overhang is not exerting any pressure for a single-family housing construction recovery.
It is clear that both these potential homeowners and the lenders are unwilling to take on the types of risk they routinely took before 2008. The single-family housing credit channel has not been restored to its old status. Is this a good finance pattern? Was the previous pattern a poor idea in the first place? Or is the country now incurring enormous societal welfare losses due to the Obama administration's failure to use its administrative powers to fix the housing-finance credit channel?
Over at Equitable Growth: The "more thoughts about this" I promised earlier below...
...If falling yields are a reflection of diminishing inflation prospects... it ought to prompt the Fed to hold off on raising short-term interest rates.... If... lower long-term rates are a reflection of investors pouring money into U.S. dollar assets, flows that could spark a U.S. asset price boom, it might prompt the Fed to push rates higher sooner.... The latter interpretation is less conventional, but it is one that New York Fed President William Dudley made.... READ MOAR
H: I want to distinguish between two different ideas.... The part of the Chicago School that has been justified is the claim that people react to incentives.... The other part of the Chicago School, which Stiglitz and Krugman have criticized, is the efficient-market hypothesis. That is something completely different.... I think you could fault the regulators as much as the market. From about 2000 on, there was a decision made in Washington not to regulate these markets. People like Greenspan were taking a very crude and extreme form of the efficient-markets hypothesis and saying this justified not regulating the markets. It was a rhetorical use of the efficient-markets hypothesis to justify policies.
...Many... economists... don’t know about an analytical approach that, it seems to me, lets you cut through most of the confusion.... An infinite-horizon model... all the action takes place in period 1.... P* is the period 2 price level, C* the period 2 consumption level... un-asterisked symbols refer to period 1... no investment, just consumption....
What determines period 1 consumption?... If we have rational expectations and frictionless capital markets--which we don’t, but let’s see what would happen if we did--the... ratio of marginal utilit[ies]... equal[s] the relative price of consumption in the two periods, where the relative price is the real discount rate.... Assume logarithmic utility, so that marginal utility is 1/C. Then... C = C*(P*/P)/(1+r).... [This] Euler equation... lets us read off current consumption from future consumption, current and future price levels, and the interest rate....
When the Financial Times's Martin Wolf asked former U.S. Treasury Secretary Lawrence Summers what in economics had proved useful in understanding the financial crisis and the recession, Summers answered:
There is a lot about the recent financial crisis in Bagehot...
“Bagehot” here is Walter Bagehot’s 1873 book, Lombard Street. How is it that a book written 150 years ago is still state-of-the- art in economists’ analysis of episodes like the one that we hope is just about to end?
There are three reasons:
The first is that modern academic economics has long possessed drives toward analyzing empirical issues that can be successfully treated statistically and theoretical issues that can be successfully modeled on the foundation of individual rationality. But those drives are disabilities in analyzing episodes like major financial crises that come too rarely for statistical tools to have much bite, and for which a major ex post question asked of wealth holders and their portfolios is: “just what were they thinking?”.
The second is that even though the causes of financial collapses like the one we saw in 2007-9 are diverse, the transmission mechanism in the form of the flight to liquidity and/or safety in asset holdings and the consequences for the real economy in the freezing-up of the spending flow and its implications have always been very similar since at least the first proper industrial business cycle in 1825.
Thus a nineteenth-century author like Walter Bagehot is in no wise at a disadvantage in analyzing the downward financial spiral.
The third is that the proposed cures for current financial crises still bear a remarkable family resemblance to those proposed by Walter Bagehot. And so he is remarkably close to the best we can do, even today.
...because I’ve been there.... I had my road-to-Damascus moment... in 1998.... Back in 1998 I... believed that the Bank of Japan could surely end deflation if it really tried. IS-LM said not, but I was sure that if you really worked it through carefully you could show... doubling the monetary base will always raise prices even if you’re at the zero lower bound.... (By the way, I screwed up the aside on fiscal policy. In that model, the multiplier is one.) READ MOAR
Over at Equitable Growth Torsten Slok says:
And Tim Duy says:
Tim Duy: Challenging the Fed: Both Paul Krugman and Ryan Avent are pushing back on the Federal Reserve's apparent intent to raise rates in the middle of next year. Why is the Fed heading in this direction?... I don't think that the Fed is reacting to external criticism. READ MOAR
David Keohane: Further reading: "Cliff Asness or teenage Twitter rant?"
...warning that Japan could face an attack from invisible bond vigilantes if it doesn’t quickly tackle long-run fiscal issues. I’m puzzled too... The truth is that I said such things about the US back in 2003. But I was wrong.... Rudi Dornbusch’s ‘overshooting’ model.... Invisible bond vigilantes. Suppose... they suddenly demand that Japanese 10-year bonds offer a rate of return 200 basis points higher than US 10-year bonds. You might be tempted to say that Japanese interest rates will spike--but the Bank of Japan controls short-term rates, and long-term rates are mainly an average of expected short-term rates, so how is this supposed to happen?... Instead, the yen would depreciate now so that investors can expect it to appreciate later. And this yen depreciation would be expansionary.... The invisible vigilantes would be doing Japan a favor if they suddenly materialized and attacked! READ MOAR
Question: "Given how low global interest rates are, it seems hard to believe that returns on investment over the next 8 to 10 years can be good. So, isn’t some of the recent increase in wealth effectively ‘stealing from the future’ as capitalization values responded to the low rates of return available from sovereign bonds?"
This is, I think, the crucial flaw in the current “Fed raises inequality!” literature...
It is also at the root of the most powerful critique of Piketty, which is, I think, Matt Rognlie’s:
Over at Equitable Growth: Ted Rivelle is clearly saying things that make sense to him. But I don't think what he says makes sense to the world, and it certainly does not make sense to me:
...obtain loans and then bid resources away from those who might employ them more productively. Along the way leverage accumulates, increasing financial risk and market volatility.... The Fed’s reluctance to pull the plug on zero interest rates is understandable. Since low rates have enabled activities that would not survive a rate rise, a renormalisation will be painful.... So why do it? Because 'kicking the can' means the inevitable deleveraging will be more painful. Sustainable growth comes from improvements to work process and product. Merely adding leverage to a business does not improve its efficiency; higher home prices do not increase the wages of those in the home.... The game of pretend ultimately has to end. For investors, the question that matters is when and how. When the end game comes, leverage will be forced out of the system and asset prices will fall. If the Fed is willing to recognise that ultimately its policies cannot dictate economic realities, rate rises should begin soon, presumably in 2015... READ MOAR
...looks likely to be the most important economics book of 2014; it could be the most important book to come out of the 2008 financial crisis and subsequent Great Recession.... It persuasively demonstrates that the conventional meta-narrative of the crisis and its aftermath, which emphasises the breakdown of financial intermediation, is inadequate. It then goes on to provide a supplementary and in some ways alternative explanation focusing on the deterioration of household balance sheets, an analysis that has profound implications for policy directed both at preventing crises and responding to them when prevention fails.... READ MOAR