Comments on: Can we inject uncertainty into monetary policy? http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: GMS http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1836 Fri, 22 May 2009 12:24:31 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1836 You are essentially arguing human risk taking doesnt work and we ought to regulate it so it comes down. I believe the entire history of capitalism proves that wrong, even with periodic and serious crisis RISK TAKING WORKS

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By: Outraged http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1826 Fri, 22 May 2009 00:32:11 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1826 If I am missing something someone please help me see the light. We have been swallowing all of this government doublespeak for years and we know it. The same types of people who made the policies and were, at least we thought, watching out for us are now saying they are going to solve the “crisis”. While it may be involving once in a lifetime corrections (aka the Great Depression when the banks collapsed) it is never the less a correction. In this case a correction of the banking and auto industries.

We trusted the government to get us this far. Now their policies will do nothing more than cost us money – taxes. Politicians can’t handle money as what they are best at if they are successful is getting elected. Back off the policies, stop taxing us, enough of new beginnings and change and let us keep our hard earned money which guess what we will spend. The economy works when there is an exchange of money for goods and servces. How about that for a concept?

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By: dsquared http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1823 Thu, 21 May 2009 23:11:21 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1823 [The resulting uncertainty would force people to take a more defensive stance at all times, just in case rates went sharply upwards — even if the probability of such a rate hike was quite low.]

How much does this “more defensive stance” cost in terms of a long term growth rate? Assuming it makes the difference between a 3% and 2% rate, then fifty years out, you’re substantially better off just putting up with a 5% recession every ten years (do it in a spreadsheet if you don’t believe me). In general, the optimal frequency of crashes is not zero. How do you think we would have got the Internet built if everyone was taking this “More defensive stance”?

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By: Mike http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1820 Thu, 21 May 2009 22:23:56 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1820 Looking at your post again, I realize that I may have misunderstood you, Felix.

By “worst possible” recession, did you mean (1) out of given set of recessions (1982, 1990, 2000, 2008), the Fed’s job is to intervene only in the most severe one; or (2) in any given recession, the Fed’s job is to make preparations that the worst possible outcome will not be too severe?

Am I making sense?

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By: Mike http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1819 Thu, 21 May 2009 22:20:46 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1819 My sense is that ex ante, every recession is the worst possible recession. I recall lots of doom-mongering in 1982 (we’ve lost our competitiveness!), 1990 (the most bank failures since the Great Depression!), and 2000 (deflation!). This isn’t to say that our current situation isn’t bad; I just fear a “worst possible” creep (similar to “mission creep”).

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By: TonyP http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1818 Thu, 21 May 2009 21:43:06 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1818 Why not apply the same thinking to a variety of assets? Make it part of regulator’s jobs to ensure that there’s a certain amount of volatility in the prices of securities. This would keep leverage down and thus help prevent asset bubbles. There are probably ways to do this that are cheap or even free for the regulators (e.g., by slightly relaxing market trading regulations for the agent or entity injecting the volatility.)

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By: Ken Houghton http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1816 Thu, 21 May 2009 21:21:21 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1816 I fear spencer’s suggestion, though there is correlation if not causation in it.

Or have you been reading Truman Bewley again, Felix?

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By: spencer http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1815 Thu, 21 May 2009 21:16:12 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1815 Maybe we need to go back to the old system where the Feds actions were a big state secrete and they did not tell us anything after a meeting.

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By: KenG http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1812 Thu, 21 May 2009 19:56:24 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1812 Monetary policy can not be used for controlling an economic system, it is only one input that enables or limits growth. Making money available doesn’t always mean people will spend or invest it, but making it available with no oversight and no rules will usually result in lots of it going up in smoke.

The only government policy that can strongly influence the direction of the economy is tax policy. And I’m not saying that cutting taxes will cause growth, there is no evidence to support that kind of wishful thinking. Cutting tax rates and hoping the savings will be invested is not a policy, it is lottery ticket. A tax system that rewards only investments that have been made, rather than ones that might be, is the only one that can have a repeatable correlation with economic growth.

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By: Lord http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/comment-page-1/#comment-1811 Thu, 21 May 2009 19:34:47 +0000 http://blogs.reuters.com/felix-salmon/2009/05/21/can-we-inject-uncertainty-into-monetary-policy/#comment-1811 An interesting idea is gdp futures. The Fed could adjust to counter deviations from constant growth.

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