Folks can learn stuff from this input by Ahha.....many pearls in this reply to Rich.....many. For those who dont know, rorocGPL= rate of rate of change of General price level..............this is a quantum construct all by itself.
To: rich evans who wrote (17864) 2/17/2011 12:20:39 PM
From: ahhaha Read Replies (2) | Respond to of 17916
Thanks for the response.
Fed dealers must buy and sell as Fed wants so FED can sell if wants.
I'm not commenting about perfunctory roles of execution, and never have. That's downstream to marketing procedure.
Commmodities are supply and demand and not rorocgpl.
Depends on the magnitude and persistence of rorocGPL since sufficiently high commodity input cost would force labor of users to raise their rates(labor cost push) or enable labor of suppliers to raise their rates. In most cases where these factors pertain in the core supply chain materials represent about 20% of costs while labor represents 70%. This enables companies to absorb fairly large increases in commodity input prices, but again, absorption slack is eaten up with input price persistence. History shows that the average take up rate is about 1 year before companies must pass through costs. In general, we're about there now. If average commodity prices remain flat we should get about .1% progressive increase in CPI as this pass through occurs. The key is POO. It must stay at current level or the entire commodity complex will persist upward, and this will result in labor price increase demands.
No booze in the punch bowl.
FED is buying the '27s at about $2B/3 days. Thus, they're spiking the bowl with tequila, or, is it fusel oil?
No wage inflation.
This is due to the existence of slack. The slack is rapidly being eaten as mentioned above. This summer we should see strikes developing, and, they could get real ugly. Adding value labor is narrowly distributed.
Banks capital constrained and not lending - no demand.
FED controls bank product quantity. Nothing to do with the capital structure of the bank as a corporation, but can have a psychological effect in stringency of terms of loans. However, banks can't repair capital structure unless they make loans, and that trumps psychology. The lack of demand comes primarily from fear of DM. The repubs may be able to mitigate that effect. Further, activity leads to increased activity because of the competitive nature of profitable action, the in crease comes from Say's law. FED has created a big supply of cheap product. Banks need to take the product and loan it to make money.
Money supply growth low- no money multiplier from monetary base.
Money growth is primarily a function of C&I loans, and multiplier comes from confidence. Both would rise rapidly if DM took his foot off the throat.
Unemployment and slow growth gives time to act.
The notion of free market in money addresses how all the above factors evolve in time, not the static details of how they're structured. The structures are fine as they stand. FED's originally chartered responsibility is completely valid. How they have devolved that responsibility into fixing prices for money constitutes all the problem. They have gotten themselves into believing that the original responsibility relies on such fixing, and this belief has been warped into eternal prosperity engineering, an approach completely alien to the American Experiment
New tech/electronic data makes things decisions more real time compared to 70s.
As I mentioned this has been neutralized at least by exponential growth in societal complexity, but also, one has to realize that such decisions are inherently specious. The economy can't be calculated, nor can it be assessed after the fact to provide instructions about how it is to be handled to realize an optimal future. There's a fairly strong argument that sophisticated decision making at the macro economic level brings about suboptimal outcomes.
Fed can raise intersst rates or change reserve interest or ratios.
But they won't when they need to, a point in time that they can't know beforehand, or if they expect to know, circumstances outside the original assumptions arise, and plans are scrapped. The result is gradualism. Coupled with a demand regime which is the default condition to warrant raising rates, FED errs on the side of ease, errs on smaller increments than necessary to abate the default condition, i.e., overheating. It's hard to believe that overheating can arise where labor supply is abundant, but the labor supply is largely "unqualified", and can't enter fast enough to relieve the effect of artificially induced demand. |
