If trickle down economics no working, will trickle up economics be gooder?

[Doc Savage Fan]

Thats a fair statement and a big part of the problem. it also limits our ability to react to asset inflation.

Have you ever read any of John Taylor's work? I highly recommend.

http://en.wikipedia.org/wiki/Taylor_rule

 

[momeNt]

Have you ever read any of John Taylor's work? I highly recommend.

http://en.wikipedia.org/wiki/Taylor_rule

Ironic that Taylor rule is being quoted in a discussion about USA's trade deficits being a problem. It is one of the main contributors to monetary policy and thus a reason we had steadily falling interest rates for the past 20 years, all of which forces banks to create more credit to make a profit, making it easier to buy products overseas and not produce ourselves and leads us right into a brick wall.

It's central planning that rotates around expectations from consistently wrong projections, that impact one of the most important things in our economy, the interest rate of money. What could possibly go wrong?

 

[lotus503]

Have you ever read any of John Taylor's work? I highly recommend.

http://en.wikipedia.org/wiki/Taylor_rule

I am very familiar with the Taylor rule, within narrow confines it works well the problem is it creates a liquidity trap.

If you are noticing a theme here its that under specific conditions a lot of the economic principles work, the problem is we maintain them when conditions change and call for a different principle. We rode supply side into the ground had we started backing off during clinton's term, the prosperity would have been less but asset inflation would have been held in check. Instead we let Greenspan create and expand bubble after bubble.

 

[momeNt]

I am very familiar with the Taylor rule, within narrow confines it works well the problem is it creates a liquidity trap.

If you are noticing a theme here its that under specific conditions a lot of the economic principles work, the problem is we maintain them when conditions change and call for a different principle. We rode supply side into the ground had we started backing off during clinton's term, the prosperity would have been less but asset inflation would have been held in check. Instead we let Greenspan create and expand bubble after bubble.

This is the politics that go into central banking though. Who is going to pull the plug on "prosperity" and sign their death warrant? Perhaps federal reserve officials need to be appointed for life and completely anonymous, to shield them from political pressures and the constant calls for transparency. Less pressure on them to succumb to political pressure if they don't have 4 year terms. See Supreme Court for example of avoiding political pressure.

 

[lotus503]

This is the politics that go into central banking though. Who is going to pull the plug on "prosperity" and sign their death warrant? Perhaps federal reserve officials need to be appointed for life and completely anonymous, to shield them from political pressures and the constant calls for transparency. Less pressure on them to succumb to political pressure if they don't have 4 year terms. See Supreme Court for example of avoiding political pressure.

Problem is if you appoint for life then we end up with a Greenspan situation where they continue to do all the wrong things.

What we need is an economic playbook created by a consensus outside of the political spectrum, Maybe a 4th branch of government.

 

[Doc Savage Fan]

Ironic that Taylor rule is being quoted in a discussion about USA's trade deficits being a problem. It is one of the main contributors to monetary policy and thus a reason we had steadily falling interest rates for the past 20 years, all of which forces banks to create more credit to make a profit, making it easier to buy products overseas and not produce ourselves and leads us right into a brick wall.

It's central planning that rotates around expectations from consistently wrong projections, that impact one of the most important things in our economy, the interest rate of money. What could possibly go wrong?

I don't think you understand the Taylor Rule or what happened when we deviated from it. This rule advocated tight money just prior to the housing boom and if we have set the Fed Funds rates accordingly it would have greatly diminished the housing boom/bust.

Anyway, Taylor's papers address the effects of trade deficits as well. Good reading for those so inclined.

 

[momeNt]

I don't think you understand the Taylor Rule or what happened when we deviated from it. This rule advocated tight money just prior to the housing boom and if we have set the Fed Funds rates accordingly it would have greatly diminished the housing boom/bust.

Anyway, Taylor's papers address the effects of trade deficits as well. Good reading for those so inclined.

It's more the notion of central planning and the inherent flaws of the system. Combine the egomania of being the person in charge of the American economy and the pressure to not snuff out a bubble, central planning would maybe be more palatable if it were more of a Friedmanite computer that applied a few trusted principles, but it would get fired the second there was a dip, or tweaked if there was an upswing it may halt. I would like to tell you that this time around it taught us a lesson, but that's false.