Re:Bernanke Says U.S. Economy Faces a ‘Wile E. Coyote’ Momen...
by nickik on Friday June 08, 2018 @01:20PM
(#17267649)
The part about 2001-2004 is pretty hard to believe. Inflation was maybe high and I do think some housing debt came from that but there is absolutely no way all the effect you claim can be explained by the monetary policy of that time.
However in 2008-2009 the Fed policy was actually extremely tight. The recession of 2008 can not be explained by the monetary policy of 2001-2006. It simply does not add up. And even people who argue for the Austrian Theory (i.e. unsustainable investment boom in long term investments).
If monetary policy was to easy, then there is simply no way to explain nominal income. How can you explain this with 'Fed was to easy':
The people who developed the Austrian cycle theory actually called this 'secondary deflation'. A static central bank policy can be inflationary or deflationary depending on the outside of the economy. Or more technically the stance on monetary policy depends on the Fed target rate relative to the natural rate.
What happened in 2008 is that the natural rate fell bellow the Fed rate and Fed policy became deflationary. They did not notice this because they observed false signals from high oil prices, you can read that in the documents from their late 2008 meeting. In the middle of a NGDP collapse they were talking about high inflation expectation, pretty insane.
The story of successive Fed created bubbles simply does not hold up.
However in 2008-2009 the Fed policy was actually extremely tight. The recession of 2008 can not be explained by the monetary policy of 2001-2006. It simply does not add up. And even people who argue for the Austrian Theory (i.e. unsustainable investment boom in long term investments).
If monetary policy was to easy, then there is simply no way to explain nominal income. How can you explain this with 'Fed was to easy':
https://oregoneconomicanalysis.files.wordpress.com/2011/10/n...
The people who developed the Austrian cycle theory actually called this 'secondary deflation'. A static central bank policy can be inflationary or deflationary depending on the outside of the economy. Or more technically the stance on monetary policy depends on the Fed target rate relative to the natural rate.
What happened in 2008 is that the natural rate fell bellow the Fed rate and Fed policy became deflationary. They did not notice this because they observed false signals from high oil prices, you can read that in the documents from their late 2008 meeting. In the middle of a NGDP collapse they were talking about high inflation expectation, pretty insane.
The story of successive Fed created bubbles simply does not hold up.