Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said Tuesday rock-bottom borrowing costs in the bond market are not a positive vote on the economic outlook.
My reaction:
1. This is another echo of 2003-2004, when Fed officials were equally puzzled by low long-term rates. I was even more puzzled than they were back then, and I am even more puzzled than they are now.
2. The conventional wisdom is that the bond markets watch the Fed, because the Fed has magical control over everything. To me, it seems more realistic to have the Fed watching the bond markets for clues about the economy. The Fed is actually powerless to alter the consensual hallucination.
3. I remember when Tyler Cowen described blog readers as like followers of a TV show or comic strip. They have cumulative knowledge of your blog, so that you can refer implicitly to what you have written previously, and they enjoy little inside jokes. Twitter has changed that. Now I have a lot of one-off readers, who leave comments that show that they know absolutely nothing of my previous writing. They have no context for my thinking on macroeconomics, and so they just decide that I am an ignoramus. I have gotten advice from people to make my blog post headlines more Twitter-friendly. In fact, I am reconsidering whether I want to get any traffic at all from Twitter. In the long run, I think I will like what I write more if I ignore the one-off reader population.
2. I think this is legit. I figure The Fed needs to try to match the money supply to the economic activity. Their goal is (should be) for money to remain neutral. They never get it quite right. They too often read feedback signals exactly backwards. However the speculative market acts like their job is to make money influences positive. But to me, any effect other than neutral is a failure. Now, for example, it certainly seems credit supply isn’t what is threatening the economy (either way, really, anything that facilitates rolling over and deleveraging is a good thing IMHO), but over-tightening would be the oft-repeated disaster. The oft-repeated disasters are getting closer together like contractions in labor. I wonder what is going to be birthed?
I’ve been reading you so long I don’t need to comment on every little thing.
Heh, long term readers don’t expect anyone to be “perfect”!
Re: #3: don’t play innocent with us, Arnold. Putting “The N-word” in your post titles is about as click-baity as it gets.
As a long time rss-fed reader, I’m selfishly on board with #3.
I don’t seem to be able to find the rss-feed of the blog, so I have to go to the webpage like a caveman. Do you know what it is?
It is best seen as a play with actors reacting dynamically to each other. Sometimes they succumb to the wiles of the others, and sometimes they draw others into their own. Not powerful nor powerless, but ambiguous, variable, and therefore somewhat unpredictable, but not entirely so, somewhat collective, but not entirely so.
I don’t like Twitter. I’ve tried to use it a few times, but the info density is so low I can’t stand it. So I’ve sworn off the medium. But then I hate Facebook almost as much, so I guess I’m weird. Or maybe just old.
Reading Twitter gives me the same feeling I think I would get if I read the stream of what would be expressed by one of those chimpanzees taught to type out communication.
I’ve been following your writing for over five years, and yet, I can’t predict what you are going to say about certain topics. That’s a good thing. If you were a predictable economist, you would quickly become boring.
As for Twitter. Well, the less said the better. (that’s a joke.)
No need to be a luddite about it. You should be able to specify website behavior for inbound twitter links and tell them some context for your views.
…the info density is so low I can’t stand it.
It is not possible to underestimate how low the information density of Twitter is. It literally creates boredom even while the page is loading, and you can feel your mind empty as you scroll. It is a software version of the neural neutralizer of Star Trek’s “Dagger of the Mind”.
But then I think the height of communication was Usenet and that Google became evil the day they despoiled Deja News by merging it with their ham-fisted Google Groups.