About marcus

marcus


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Registered Mar 23, 2009

marcus's most recent comments:

  • On 25 Aug 2014 in Nearly everyone on earth is blaming the federal reserve, marcus said:

    Not saying it should be market based. Just trying to give you an idea of what I meant by the fed holding rates below what they otherwise would be. And I did not say that a market determines the discount rate.

    In any case, I give up.

  • On 25 Aug 2014 in Nearly everyone on earth is blaming the federal reserve, marcus said:

    iwog says

    Hold rates below undefined?

    I said it's not well defined, and I understand that you don't know all that much about those markets, but there is an actual market for short term securities. It's huge. And yes it's highly influenced by fed actions such as repos or matched sales, if they are done beyond normal balancing type transactions, and yes these things are known by the market. The market can tell when the fed is pushing one way or the other. And then there is the discount rate and fed funds rates to banks.

  • On 25 Aug 2014 in Nearly everyone on earth is blaming the federal reserve, marcus said:

    iwog says

    marcus says

    No, it's simply the belief that holding interest rates below what they should be is (or at least can be) inflationary. This is accepted by virtually the entire economics world.

    As evidence of this not being true, I submit Japan which has had ZIRP for decades yet no inflation or outright deflation.

    I said hold rates below what they should be.

    iwog says

    1. "What they should be" is what exactly??

    There isn't a clear answer to that, but one indicator would be what the market rate is for 90 day Tbills and commercial paper (without extreme fed intervention).

    But it's a concept, not necessarily something that's so well defined.

    What the Japan story tells us is that they have been in such a deflationary environment that their low rates were where they should be. Low interest rates are not by definition inflationary. But when a central bank forces rates to be lower than they otherwise would be, for a protracted period, that is inflationary. A really wide yield curve with low ST rates is ( I think) always going to be inflationary.

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