Output Gap Archive

Fiscal and monetary policy in a liquidity trap

Not bad, but let’s take it up to the next level. Comments below: Fiscal and monetary policy in a liquidity trap By Martin Wolf With floating fx, it’s always a ‘liquidity trap’ in that adding liquidity to a system necessarily not liquidity constrained is moot. Part 1 What is the correct approach ...Read More

Consumer borrowing rose $19.3 billion in December

With the federal deficit coming down it takes more consumer and business borrowing to keep GDP (modestly) growing. And note that student loans are reportedly responsible for half the gain. Looks to me like it’s going to take a lot more consumer debt growth just to start lowering the output gap. The ...Read More

Obama Says U.S. Must Reduce Debt, Spur Job Growth

[Skip to the end] This is a ridiculous notion that further shows there is no understanding of the monetary system at the highest levels, or the ‘debt’ per se would not be a concern. They obviously don’t understand taxes function to regulate aggregate demand (spending) and not to raise revenue per se. ...Read More

Assessing the Fed under Chairman Bernanke

[Skip to the end] “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” Keynes, Chapter 12, The General Theory of Employment, Interest, and Money The Fed has failed, but failed conventionally, and is therefore being praised for what it has done. The Fed has a ...Read More

ECB statements

[Skip to the end] ECB’s Stark Says Economy May Recover Sooner Than Forecast Stark Says State Debt May Boost Long-Term Market Rates, BZ Says *ECB’S STARK SEES `NO BIG PROBLEMS’ UNWINDING ASSET PURCHASES *ECB’S STARK COMMENTS IN INTERVIEW WITH BOERSEN-ZEITUNG *ECB’S STARK SAYS RISING GOVT DEBT MAY BOOST LONG-TERM MKT RATES *STARK ...Read More

Plosser the hawk

Plosser, Dissenting Fed Voter, Says Price Stability Is Priority By John Brinsley March 28 (Bloomberg) — Federal Reserve Bank of Philadelphia President Charles Plosser, who voted against this month’s interest-rate cut, said keeping inflation in check is the “most effective” way of ensuring economic growth and job creation. “Price stability is not ...Read More

Reuters: payrolls and the output gap

U.S. Feb payrolls drop for second straight month by Glenn Somerville U.S. employers cut payrolls for a second straight month during February, slashing 63,000 jobs for the biggest monthly job decline in nearly five years as the labor market weakened steadily, a government report on Friday showed. The Labor Department said last ...Read More

Bloomberg: from Fisher the hawk

While Fisher is perhaps the most hawkish voting member and voted against Bernanke at the last meeting, continuously rising crude/food prices and a not so large output gap are causing more voting members to firm their anti-inflation rhetoric in recent weeks: Fisher Says Credit Markets May Not Force Fed to Act by ...Read More