Dollars and Jens
Friday, October 26, 2012
Even of the 2% growth rate, a large chunk of that is government spending.  More than all of the fixed investment was in fact residential; it may be that businesses were taking a break until the election.  Non-farm private inventory continued to decrease, but farm inventory "investment" went from negative to positive.
IV 08I 09II 09III 09IV 09I 10II 10III 10IV 10I 11II 11III 11IV 11I 12II 12III 12
Gross domestic product-8.9-5.3-.
Nondurable goods-.92-.05-.
Durable goods-2.12.11-.141.43-.
Change in private inventories-1.54-2.29-
Fixed investment-4.05-4.73-2.49-.32-.69-.101.58-.10.87-.141.391.751.
Net exports of goods and services-.122.452.47-.70-.05-.83-1.81-.951.
Government spending.35.371.94.79.23-.69.59-.06-.94-1.49-.16-.60-.43-.60-.14.71


Thursday, October 25, 2012
FOMC statement
It appears the WSJ has moved its fed statement comparison behind  a subscriber wall, so I'll start doing this again, to the extent that I have time and think about it.

The FOMC statement, as revised:
Information received since the Federal Open Market Committee met in August September suggests that economic activity has continued to expand at a moderate pace in recent months.  Growth in employment has been slow, and the unemployment rate remains elevated.  Household spending has continued to advance advanced a bit more quickly, but growth in business fixed investment appears to have has slowed.  The housing sector has shown some further signs of improvement, albeit from a depressed level.  Inflation has been subdued, although the prices of some key commodities have increased recently.   Inflation recently picked up somewhat, reflecting higher energy prices.  Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.  The Committee is remains concerned that, without further sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.  Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook.  The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.  The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June Treasury securities, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed  securities in agency mortgage-backed securities.  These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. 
The Committee will closely monitor incoming information on economic and financial developments in coming months.  If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.  In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.  In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen.  Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit disagreed with the description of the time period over which a highly accommodative stance of monetary policy will remain appropriate and exceptionally low levels for the federal funds rate are likely to be warranted.


Tuesday, October 02, 2012
political economy
I was at a talk yesterday about the resumption of metallic backing for Scandinavian currencies after the Napoleonic wars and then again after World War I; the speaker mentioned the UK experience in the first era but not the second.  I commented that the UK experience in the second era was very different from in the first era (more so than was the case in Scandinavia) because the foreign investment position of the UK had changed, whereupon someone else — there's no question that I was the most ignorant person in the room on this topic — noted that the parliamentary reform of the mid 1800s may have made a bigger difference; debtors were in a much stronger political position vis-à-vis creditors in 1920 than 1820, and deflating back to pre-war price levels wasn't something in which the latter parliament had so much interest.

I think this is a very good point, and especially in evaluating the historical why of currencies, which are even more regularly subject to the actual or threatened intervention of political bodies than are other economic phenomena, looking at who has political power is always going to be important.  I do think that the foreign investment position had something to do with it; if the pre-war investment income had been providing foreign currency, the macroeconomic effects of revaluation would have been less severe, and that would have increased parliament's willingness to attempt it.  I'm less confident than I was 24 hours ago, though, that that would have been sufficient.  Certainly it should be noted that naive treatment of "who has political power?" can be misleading as well; while it may be largely the case in some democracies that voters tend to vote for whichever candidate will humiliate and take things from the other guy and give them to them (the history of Latin America seems to be plagued by this), in developed countries such voting is heavily constrained by conceptions of fairness; no English creditor was agitating for revaluation to a lower price level than existed before the war, and few English debtors were agitating for much larger devaluation from the new price level.  No doubt Englishmen would have been more favorably disposed in general to revaluation if it had been relatively cost free in terms of the functioning of the national economy.  Still, where different groups will support different policies, for whatever reason, it will matter which of them gets to decide how the national government will behave.

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