Comments on: Less Than ZIRP

By: dajeeps

dajeeps — Fri, 17 Feb 2012 01:25:09 +0000

The whole of the housing/financial crisis up to now has been one disgusting event after another.

By: skorrent1

skorrent1 — Thu, 16 Feb 2012 18:51:47 +0000

Who said something like “Everything (Keynes) said that was true was not new, and everything he said that was new was not true.”

By: baserunr

baserunr — Thu, 16 Feb 2012 17:13:45 +0000

He was, at heart, an eliteist. He never grasped the fact that the free market was efficient. He saw temporary and transitional inefficiencies, and like most modern-day liberals, believed that the normal course of correction was too slow, and too ineffective.

The true mark that ZIRP is a failure is this test: in what free-market environment would a saver accept 0.2% interest on money saved?

By: Repair_Man_Jack

Repair_Man_Jack — Thu, 16 Feb 2012 14:36:32 +0000

This always winds up in tears.

By: Repair_Man_Jack

Repair_Man_Jack — Thu, 16 Feb 2012 14:00:05 +0000

If you want government to control the flow of capital to the highest degree of precision, than destroying the motivation for individual savings almost becomes an engineering necessity. While you and I think of the interest paid on savings as a reward for prudence and foresight, Keynes sees this interest as a form of viscosity that keeps money from flowing as rapidly as he would like it to.

Which leaves we wondering what Keynes’ ultimate goals really were. Did he want people to actually be better off, or did he merely want the state to more completely control whether people could successfully become better off? The answer to that question informs whether you think Keynes was really wrong on this issue.

By: Adjoran

Adjoran — Thu, 16 Feb 2012 04:54:19 +0000

It’s suicide. The Bank of Japan tried it in the wake of their own banking crisis in the late ’80s; it resulted in a long period of neglible growth, now known as the “Lost Decade.”

The most interesting thing about Keynes is that virtually everything he posited has proven wrong over time.

By: dajeeps

dajeeps — Thu, 16 Feb 2012 00:51:57 +0000

Without taking a position.

I don’t think it is at all helpful for the Fed to be focused on individual sectors of the economy. The Fed is blunt instrument, not a scalpel. It can either raise all boats or hold them all down, and is really lousy at producing generally positive outcomes while focused on a single tree instead of the whole forest.

This is the kind of chaos that happens when there is lack of political leadership, and everyone wanders off to take care of issues they think are important because no one else is doing it, while their own responsibilities are neglected. The Fed really is no different, although one would think that because what it does impacts everyone, that those in it would have more professional and ethical sense to not be so distracted.

By: acat

acat — Thu, 16 Feb 2012 00:29:29 +0000

and the two ways they can go about this are either letting inflation bring the dollar cost of a home down to historical norm values, or to re-inflate the housing bubble.

Assuming the latter – re-inflating a burst balloon – is impossible, the alternative is to let the dollar de-value a bit. Eventually, housing will stabilize, although they’ve got quite a way to go … one source tells me the last time housing dollar cost and value were in line, historically, was the early 1990s …

And yes, everyone with an ARM is in deep, deep trouble… but I don’t recall agents of Golden West holding guns to customers’ heads.

Mew

By: dajeeps

dajeeps — Thu, 16 Feb 2012 00:05:39 +0000

Or make it five by adding “credit crunch.” Rightly or wrongly, the Fed is focused like a laser on housing, and I wouldn’t expect any movement from the zero bound until there some recovery there.