Re: Re: U.S. Monetary Policy
Jim Devine wrote: didn't "Operation Twist" (the early 1960s effort to raise short rates while lowering long ones) fail? or did it only fail after awhile, e.g., after the election? Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine I don't know Jim, what do you think? Was it the purchase of long-term bonds that failed to put downward pressure on their yields, the sale of short-term bonds that failed to put upward pressure on their yields, or both? Edwin (Tom) Dickens
Re: Re: Re: U.S. Monetary Policy
I don't know Jim, what do you think? Was it the purchase of long-term bonds that failed to put downward pressure on their yields, the sale of short-term bonds that failed to put upward pressure on their yields, or both? I've never understood the reasoning behind operation twist. Although a drop in long-rates would make it cheaper to borrow and stimulate real spending, a rise in short rates, it seems, would make lenders less willing lend long and finance real investment. The reasoning behind operation twist seems to presume that the long and short markets are unconnected. Am I misunderstanding this? Ellen
Re: Re: Re: Re: U.S. Monetary Policy
As I recall the explanation, long-term capital investment depends upon long-term rates, while short-term consumption is affected by short-term rates. In fact, of course, investment is pretty insensitive to interest rates. Ellen Frank wrote: I don't know Jim, what do you think? Was it the purchase of long-term bonds that failed to put downward pressure on their yields, the sale of short-term bonds that failed to put upward pressure on their yields, or both? I've never understood the reasoning behind operation twist. Although a drop in long-rates would make it cheaper to borrow and stimulate real spending, a rise in short rates, it seems, would make lenders less willing lend long and finance real investment. The reasoning behind operation twist seems to presume that the long and short markets are unconnected. Am I misunderstanding this? Ellen -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
Re: Re: Re: Re: Re: U.S. Monetary Policy
The Fed is driving up (and tomorrow probably will drive up) short rates while the Treasury is driving down long rates. However, as Ellen notes, there are real limits to this. The banks profited mightily from high long rates and low short rates in the early nineties (allowing them to escape the fate of most Savings Loans). Similarly, they lose when this spread is shrinking, since they borrow short (taking deposits) and lending long. Mainstream money/banking/finance says that there normally should be a maturity premium, so that long rates should always be a fixed number of percentage points above the geometric average of current and expected short rates (if we're talking about bonds that are don't differ in terms of risk, liquidity, and tax treatment, only differing in terms of years to maturity). That means that the long rate can only fall relative to the current short rate if expected short-term rates are falling. That is, the long rate can fall relative to the federal funds rate only if people expect the Fed to loosen up in the future (increasing the supply of funds) or the demand for funds to fall (perhaps due to a recession). Alternatively, the fall in long rates could be seen as temporary. If it's the latter (which seems likely), then the fall in the long rate also won't have any big effect on borrowing for business fixed investment, reinforcing Michael's point. (I'm thinking that a lot of the new debt that a business investor would take on would have variable rates, so that a temporary dip in the long rate wouldn't have a big effect.) Alternatively, monetary policy (tomorrow's hike) and fiscal policy (buying back long-term government debt) are working at cross-purposes. That would help explain why Greenspan isn't succeeding at slowing the US economy. does this make sense? Tom Dickens wrote: I don't know Jim, what do you think? Was it the purchase of long-term bonds that failed to put downward pressure on their yields, the sale of short-term bonds that failed to put upward pressure on their yields, or both? I have forgotten what I knew about "Operation Twist," and can't find the Modigliani Sutch article I have on it (and its alleged failure). Ellen Frank wrote: I've never understood the reasoning behind operation twist. Although a drop in long-rates would make it cheaper to borrow and stimulate real spending, a rise in short rates, it seems, would make lenders less willing lend long and finance real investment. The reasoning behind operation twist seems to presume that the long and short markets are unconnected. Am I misunderstanding this? Michael P. wrote: As I recall the explanation, long-term capital investment depends upon long-term rates, while short-term consumption is affected by short-term rates. In fact, of course, investment is pretty insensitive to interest rates. Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
DPI in Mexico
from SLATE's "Today's Paper" column (3/21/00): The LA [TIMES] ... leads with how Mexico is currently enjoying its longest period of economic growth since the 1970s, which the paper says is a clear result of the country's various recent global trade alliances such as NAFTA, which has generated 1 million jobs in Mexico and has helped attract record levels of foreign investment. The only weak link in the Mexican recovery is the lag in real wages. But, says the story, jobs created by foreign investments pay better than the average Mexican job. comments? Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
Re: Re: Re: Re: Re: U.S. Monetary Policy
Michael Perelman wrote: As I recall the explanation, long-term capital investment depends upon long-term rates, while short-term consumption is affected by short-term rates. In fact, of course, investment is pretty insensitive to interest rates. Was this before the yield curve was seen as a leading indicator of economic activity? Doug
Re: Re: U.S. Monetary Policy
The magical yield curve supposedly indicates the type of pressures that are building up in the economy. Operation Twist was supposed to manipulate the environment. Doug Henwood wrote: Michael Perelman wrote: As I recall the explanation, long-term capital investment depends upon long-term rates, while short-term consumption is affected by short-term rates. In fact, of course, investment is pretty insensitive to interest rates. Was this before the yield curve was seen as a leading indicator of economic activity? Doug -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
Re: DPI in Mexico
The Mexican report is not surprising. The jobs in the foreign owned plants do commonly pay more. One problem overlooked in your Slate report is that trade is destroying small-scale Mexican agriculture, eliminating opportunities on land faster than they open up in industry. One further question, while the Mexican economy may be growing, how much of that growth trickle's down? Jim Devine wrote: from SLATE's "Today's Paper" column (3/21/00): The LA [TIMES] ... leads with how Mexico is currently enjoying its longest period of economic growth since the 1970s, which the paper says is a clear result of the country's various recent global trade alliances such as NAFTA, which has generated 1 million jobs in Mexico and has helped attract record levels of foreign investment. The only weak link in the Mexican recovery is the lag in real wages. But, says the story, jobs created by foreign investments pay better than the average Mexican job. comments? Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
Re: CP's Anti-Racist Discipline
Hi Jim D. Justin: It helps if a group has clear "principles of unity": what is the group _for_ and _against_? how does it propose to attain those goals, etc. In fact, without some notion of "P of U" (as the Maoists used to call them), there really isn't a group. Exactly. I think that at least the following should be among the principles of unity of _any_ group that wants to be called leftist: For: socialism (of some kind -- disagreements should be allowed here) Against: sexism/heterosexism, racism, imperialism, oppressions based on disabilities, etc. My concern is that the opposition to imperialism has been _weakening_ since the end of the Cold War. The CPUSA went very far in creating the culture of anti-racism among white workers during the 30s, but that's because the Party leaders had already made up their minds about winning blacks for the Party by fighting racism inside, not just outside, the Party. The Comintern resolution on the "Negro Question" helped to firm up their political backbones. The CPUSA should be praised for that, though I'd like to know more about how other socialist groups fared on this issue (and the source of their politics). Is Lou here now? He can regale you with the SWP history on anti-racism. The problem with the CPUSA is that at the same time that good stuff (like anti-racism) came down from on high, so did bad stuff (tailing the USSR). Ain't that the dialectical truth. Have you read _Labor's War at Home: the CIO in World War II_ by Nelson Lichtenstein (Cambridge: Cambridge University Press, 1982), for instance? The CP's Popular Front culture did much to democratize America, but the turn to patriotism Americanism during that period was no good (and helped to do in the CP itself after WW2). Also, the top-down type of organization would drive all -- or almost all -- of the participants in pen-l nuts. I'd bet that those who like that kind of bureaucratic organization imagine themselves at the top of the hierarchy. Two qualifications. I think that most if not all PEN-L-type academics (or maybe most paid intellectuals in general) might be a tad too *individualist* to become reliable communists; academy mainly operates on the ideal of competition meritocracy, not solidarity, (everybody is too in love with his personal "opinion" ready to kill or die to defend it, instead of thinking in terms of the good of the working class). Yours truly included (I've _never_ been a member of _any_ socialist party -- I'm afraid I may be an anti-social socialist). Most paid intellectuals might be better suited for fellow-travelling. A Communist Party needs lots of fellow travellers, so I'm not saying it's bad to be a Marxist academic. Besides, exceptions exist, and with the proletarianization of intellectual work, things may change, and soon. Now, "bureaucracy." What is "bureaucracy"? Any organization with more than a handful of members needs a structure of delegation representation -- hence bureaucracy. How do you run modern industries distribution systems without bureaucracy of any kind? The same for political parties. Bureaucracy can be minimized made more efficient controlled democratically, but it can't be reduced to zero (unless you believe "small is beautiful"). Justin wrote: Probably I would not have survived in the CPUSA in the 1930s, I'm terrible about thought control. No doubt I would have been shot in the CPSU as toon as they noticed me. This is a criticism? Recall that the CPUSA failed to oppose the internment of Japanese-Americans. So I wouldn't have survived in it either. I just think they struggled admirably for the defence of black Americans. However, I don't understand the last point: is the notion that it is somehow racist of me to be disgusted and disappointed with the terrifying degree of reflex conformity among (mostly white, if that's relevant) Antioch students? Not racist but too individualist (see above). Well, you can't help it -- especially now that you are a lawyer, if you get your own private practice, you are an authentic member of the petty producers! :) Yoshie
Re: Re: CP's Anti-Racist Discipline
My concern is that the opposition to imperialism has been _weakening_ since the end of the Cold War. yeah. Like some supported the US against Iraq... Also, the top-down type of organization would drive all -- or almost all -- of the participants in pen-l nuts. I'd bet that those who like that kind of bureaucratic organization imagine themselves at the top of the hierarchy. Two qualifications. I think that most if not all PEN-L-type academics (or maybe most paid intellectuals in general) might be a tad too *individualist* to become reliable communists; academy mainly operates on the ideal of competition meritocracy, not solidarity, (everybody is too in love with his personal "opinion" ready to kill or die to defend it, instead of thinking in terms of the good of the working class). Yours truly included (I've _never_ been a member of _any_ socialist party -- I'm afraid I may be an anti-social socialist). right. Most paid intellectuals might be better suited for fellow-travelling. A Communist Party needs lots of fellow travellers, so I'm not saying it's bad to be a Marxist academic. Besides, exceptions exist, and with the proletarianization of intellectual work, things may change, and soon. the rising share of academics is proletarianized, with temporary non-tenure-track positions. Now, "bureaucracy." What is "bureaucracy"? Any organization with more than a handful of members needs a structure of delegation representation -- hence bureaucracy. How do you run modern industries distribution systems without bureaucracy of any kind? The question is "who guards the guardians?" (to paraphase Plato). I'm not against bureaucracy if it's subject to democratic control from below. But bureaucracy can become literally bureaucratic, i.e., rule by bureaus, where the officials have insulated themselves from democratic control. A lot of my friends used to be in an organization -- the International Socialists -- which was taken over by the folks at the top, who decided to send the rank-and-file members to "colonize" blue-collar factories, etc. powered by excessive, triumphalist, rhetoric. (Louis Proyect's old organization, the Socialist Workers' Party, went through a similar process.) It helped produce Teamsters for a Democratic Union, but a lot of it was craziness, sending skinny middle-class kids into factory work, right before the shake-out of the 1980s, when a lot of those factories shut down. Social-democratic parties have had the same problem. The old SPUSA (which I belonged to for awhile during the early 1970s) got taken over by the national office and became the Social Democrats, USA, a hard-core AFL-CIA party. When I was in the New American Movement in the later 1970s, the local branch got taken over by the newspaper people and the officials, who dragged the organization to the right Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
BLS Daily Report
BLS DAILY REPORT, TUESDAY, MARCH 21, 2000 One of the hottest new trends in employee fringe benefits, highlighted by actions of several high profile companies, is supplying workers with home computers. ... And as a less costly alternative, some employers are offering a program to their employees that makes computer purchases more affordable. Eighteen percent of employers surveyed last year by the Society for Human Resource Management said they offer such an assistance program, and others said they were planning to start one. ... However, attorneys warn that employer-provided home computers can pose security risks and liability concerns. Also, any work done on the home computers could raise issues of hours worked under the Fair Labor Standards Act. ... (Daily Labor Report, page D-1). With unemployment low and a record number of Americans behind bars, prison labor is coming to mean much more than painting license plates. As inmates undertake everything from telemarketing to the manufacturing of computer circuit boards and furniture, the change has caused a growing debate playing out in state legislatures and in two bills before Congress over the role the nation's two million prisoners should play in the economy. Across the country, more than 80,000 inmates now hold traditional jobs, working for government or private companies and earning 25 cents to $7 an hour. The private sector programs, which exist in the states and employ 3,500 have doubled in size since 1995 after years of almost no growth. And the federal program that employs 21,000 inmates, up 14 percent in the last 2 years, and that has $600 million in annual sales, is seeking to expand. Both supporters and opponents agree the debate is at a critical juncture because employment in prisons could spread quickly in the coming years. On virtually every other question, however -- whether prison labor helps inmates or is cruel to them, whether it is an economic benefit or a force holding down wages -- the two sides differ vehemently. ... (New York Times, March 19, page A1). application/ms-tnef
Re: Marx and Kapital
GDP is used to hoodwink the people. CB "George Pennefather" [EMAIL PROTECTED] 03/16/00 02:33AM In the opening paragraph of Capital Marx proclaims: The wealth of those societies in which the capitalist mode of production prevails, presents itself as "an immense accumulation of commodities," its unit being a single commodity. Our investigation must therefore begin with the analysis of a commodity. So the capitalist mode of production can prevail in more than one society. To say that the "wealth of those societies presents itself as an immense accumulation of commodities" is not true. Much of the wealth is in the form of industrial capital which is not capital in the form of the commodity. This mistaken premise renders the validity of making the commodity a starting point questionable on that basis. Warm regards George Pennefather Be free to check out our Communist Think-Tank web site at http://homepage.eircom.net/~beprepared/
Re: Re: Marx and Kapital
Charles Brown wrote: GDP is used to hoodwink the people. Did Chang move to Detroit? Doug
Re: Re: Re: Marx and Kapital
On Tue, 21 Mar 2000, Doug Henwood wrote: Charles Brown wrote: GDP is used to hoodwink the people. Did Chang move to Detroit? Doug They sure need him there these days them why they need not fear unemployment. Steve
RE: Re: Re: CP's Anti-Racist Discipline
. . . the International Socialists -- which was taken over by the folks at the top, who decided to send the rank-and-file members to "colonize" blue-collar factories, etc. powered by excessive, triumphalist, rhetoric. (Louis Proyect's old organization, the Socialist Workers' Party, went through a similar process.) It helped produce Teamsters for a Democratic Union, but a lot of it was craziness, sending skinny middle-class kids into factory work, right before the shake-out of the 1980s, when a lot of those factories shut down. . . . At the time it didn't seem crazy at all. I'm always surprized when people disparage this policy, with the benefit of hindsight. This is what professional communist cadres do. If we had been at the beginning of a labor upsurge, the colonizers would have had a salutary and important role. At the very least, for someone from a bourgeois student milieu it was educational. Problems would come from sending someone in who was mandated to carry out a crazy politics (i.e., PLP, assorted maoists), or sending someone who was wrong for the task by disposition. ISO was not crazy, in my view. Wrong in various ways but not crazy. Probably the most realistic of all the would-be colonizers, in fact, aside from the CP-USA. mbs
Re: Re: Re: Re: Re: Re: U.S. Monetary Policy
. That means that the long rate can only fall relative to the current short rate if expected short-term rates are falling. That is, the long rate can fall relative to the federal funds rate only if people expect the Fed to loosen up in the future (increasing the supply of funds) or the demand for funds to fall (perhaps due to a recession). Alternatively, the fall in long rates could be seen as temporary. Isn't it also possible that the long-rate can fall because the economy is slowing, while the short-rate remains high because that is controlled by the Fed? I mean long-rates are set by supply and demand, so a decline in demand will pull the rate down. Right now, it seems, the decline in demand is coming from the US Treasury, but I recall that in 1994, long-rates fell because borrowers couldn't pay the higher rates established when the Fed tightened. On the other hand, the Fed has pretty tight control over the short-market, so that rate isn't really market determined. Ellen Jim writes: ... then the fall in the long rate also won't have any big effect on borrowing for business fixed investment, reinforcing Michael's point. (I'm thinking that a lot of the new debt that a business investor would take on would have variable rates, so that a temporary dip in the long rate wouldn't have a big effect.) Alternatively, monetary policy (tomorrow's hike) and fiscal policy (buying back long-term government debt) are working at cross-purposes. That would help explain why Greenspan isn't succeeding at slowing the US economy. does this make sense?
Re: Re: Re: Re: Re: Re: Re: U.S. Monetary Policy
I wrote: That means that the long rate can only fall relative to the current short rate if expected short-term rates are falling. That is, the long rate can fall relative to the federal funds rate only if people expect the Fed to loosen up in the future (increasing the supply of funds) or the demand for funds to fall (perhaps due to a recession). Alternatively, the fall in long rates could be seen as temporary. Ellen writes: Isn't it also possible that the long-rate can fall because the economy is slowing, while the short-rate remains high because that is controlled by the Fed? I mean long-rates are set by supply and demand, so a decline in demand will pull the rate down. Right now, it seems, the decline in demand is coming from the US Treasury, but I recall that in 1994, long-rates fell because borrowers couldn't pay the higher rates established when the Fed tightened. On the other hand, the Fed has pretty tight control over the short-market, so that rate isn't really market determined. It's possible. Is the demand for long-term credit falling? is the economy slowing? I checked out recent issues of Dave Richardson's daily newsletter to find: The pace of the U.S. industrial sector cooled considerably in February, reflecting a moderation in manufacturing as well as a drop in mining activity, according to figures from the Federal Reserve. Industrial production -- combining activity in factories, mines, and utilities -- advanced 0.3 percent seasonally adjusted in February, a marked slowdown from the unusually strong 1.1 percent jump in January. ... (Daily Labor Report, page D-1)_U.S. industrial production rose less than expected in February, a slowdown that may be short-lived as lean inventories suggest factories will stay busy in coming months. Analysts, who had been forecasting a 0.6 percent increase, said they doubt the report signals the economy is slowing after four interest rate increases by the central bank since last June (Washington Post, page E1; New York Times, page C30)_Cooling off a bit after one of its sharpest increases in recent memory, industrial production grew at a less than expected 0.3 percent in February. But output at U.S. factories, mines, and utilities remained at sky-high levels. ... (Wall Street Journal, page A2). further, the industrial sector isn't as important to employment as it used to be. I don't have the time to sift through all of Dave's evidence. Is there any evidence that aggregate demand is slowing? Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
kBureaucracy, et centera, was Re: CP's Anti-Racist Discipline
Jim Devine wrote: Now, "bureaucracy." What is "bureaucracy"? Any organization with more than a handful of members needs a structure of delegation representation -- hence bureaucracy. How do you run modern industries distribution systems without bureaucracy of any kind? The question is "who guards the guardians?" (to paraphase Plato). I'm not against bureaucracy if it's subject to democratic control from below. But bureaucracy can become literally bureaucratic, i.e., rule by bureaus, where Plato was ingenuous -- he *knew* who was go guard the guardians. But Marx makes the same point (Theses III: ". . .forgets that it is men that change circumstances and that the educator himself needs educating." I think almost all socialists would agree on the need for "democratic control from below," but of course the real question is how to build that control into a movement and then maintain it. The Stalinist purges were in a least one of their aspects an attempt to control the growth of a bureaucracy, as was the Cultural Revolution. the officials have insulated themselves from democratic control. A lot of my friends used to be in an organization -- the International Socialists -- which was taken over by the folks at the top, who decided to send the rank-and-file members to "colonize" blue-collar factories, etc. powered by excessive, triumphalist, rhetoric. (Louis Proyect's old organization, the Socialist Workers' Party, went through a similar process.) It helped produce Teamsters for a Democratic Union, but a lot of it was craziness, sending skinny middle-class kids into factory work, right before the shake-out of the 1980s, when a lot of those factories shut down. :-) I don't know about the skinny part. I once worked for the Transmission Division of GM at the old Willow Run plant in Ypsilanti -- and as far as I can remember (45 years ago) a rather large proportion of the men and one woman in my department were skinny. Social-democratic parties have had the same problem. The old SPUSA (which I belonged to for awhile during the early 1970s) got taken over by the national office and became the Social Democrats, USA, a hard-core AFL-CIA party. I think this is an extremely important point -- it warns against the illusion held by all too many that ritualistic denunciation of "Stalinism" and "authoritarianism" is all that it takes to preserve democracy. [Is CIA a deliberate misprint?] When I was in the New American Movement in the later 1970s, the local branch got taken over by the newspaper people and the officials, who dragged the organization to the right It can work in various ways. I belonged to the LRS in its final years. The top officials used democratic centralism to dissolve centralism -- and the organizationas a whole to boot. Carrol
Re: RE: Re: Re: CP's Anti-Racist Discipline
In a message dated 00-03-21 18:47:13 EST, you write: he International Socialists -- which was taken over by the folks at the top, who decided to send the rank-and-file members to "colonize" blue-collar factories, etc. powered by excessive, triumphalist, rhetoric. ( My outfit, Solidarity, is the heir to this "colonization"--althgough we don'trequire folks to go into the factories (or do anything else), many in the group still encourage it. The people in Soli who did this are probably the most successful examples of the potentials and limits of the strategy. They have been the backbone of a lot of the union democracy movement, TDU, New Directions in Auto, Labor Notes, that sort of thing. They have become union local presidents and officers and led militant struggles and become respected activists. They have recruited practically no workers. In fact, I can't even be real specific about who they are because their work does not permit them--so they think, or many of them--to have an open socialist identification because of fear that red-baiting will compromsie their effectiveness. I respect them immensely, and when I decided to switch careers out of academics, I went to law school. I have also seen lots of friends in other contexts who went to colonize and got lost, particularly when their left organizations faded or folded or even just switched strategies. Would "colonization": be what "communist militants" do in an upsurge? I dunno and neither does anyone else. We have had only one cycle where we saw sucha things, when the CP, mainly, organized the CIO unions. I don't mean it was mainly the CP that did that, I mean among left outfits, it was the most successful in that line of work. But then it was drawing on a mainly working class base to start with, not radical college students, unlike my Soli comrades who were in the IS in the 70s. And that base no longer exists. So where does that leave us? I dunno. --jks
Kosovo- once again
Any one who harboured any doubt that the NATO pusche in Kosovo was anything other than an imperialist junket, allied with criminal, drug-pushing elements, should read the article in the most recent issue of *Canadian Dimension*, entitled "After Kosovo: A marriage of heroin and war in the new millennium" by Alex Roslin. More chilling for Canadians is the article "Louise Arbour: Unindicted war criminal," byChristopher Black and Edward Herman. (Arbour has since been appointed -unfortunately -- to Canada's Supreme Court.) In the same general vein, you might also check out "Crimes of our times" by Henry Heller which looks at the general increase of crime and drugs in our cities under capitalism. (Canadian Dimension, March-April 2000. "For People who want to change the World"). This is one of the best issues of CD I have seen in some time. (I hate to admit it but I was one of the founding editors of it some 34 or more years ago. Well, I do not hate to admit that I was a founding editor. I just hate to admit it was so long ago. In any case, this issue is great!) In solidarity, nas vidinje, Paul Phillips, Economics, University of Manitoba
Re: Re: Re: Re: U.S. Monetary Policy
Ellen Frank wrote: I've never understood the reasoning behind operation twist. Although a drop in long-rates would make it cheaper to borrow and stimulate real spending, a rise in short rates, it seems, would make lenders less willing lend long and finance real investment. The reasoning behind operation twist seems to presume that the long and short markets are unconnected. Am I misunderstanding this? Ellen In other words, is there financial-market segmentation or is there a homogeneous loanable-funds market? An argument for the former, leaving aside theoretical considerations such as the capital controversies, is that central banks and finance ministeries prefer a "bills only" policy. Edwin (Tom) Dickens
Re: Re: Re: Re: Re: U.S. Monetary Policy
Michael Perelman wrote: As I recall the explanation, long-term capital investment depends upon long-term rates, while short-term consumption is affected by short-term rates. In fact, of course, investment is pretty insensitive to interest rates. The argument has less to do with short-term consumption than with the management of foreign-exchange reserves. The interest-rate insensitivity of investments suggests the irrelevance of a transmission mechanism of monetary policy via an argument in a mainstream aggregate demand function. Heterodox economists tend towards specifying a direct effect of interest rates on income distribution.
Re: Re: Re: Re: Re: Re: U.S. Monetary Policy
Jim Devine wrote: The Fed is driving up (and tomorrow probably will drive up) short rates while the Treasury is driving down long rates. However, as Ellen notes, there are real limits to this. The Treasury probably has $220 billion to spend on long bonds between now and November.
Re: Re: Re: U.S. Monetary Policy
Michael Perelman wrote: The magical yield curve supposedly indicates the type of pressures that are building up in the economy. Operation Twist was supposed to manipulate the environment. Like fiscal surpluses to spend?
