The null hypothesis is that there is no relationship between two variables. The alternative hypothesis is that there is a relationship.

As it turns out, the largest residuals are not from the UK, but from the five countries with the fastest rates of productivity growth, where oil consumption fell an average of 8.9% and productivity increased by an average of 14.1%. And even then the line of best fit only has a slope coefficient of 0.115 (and a p-value of 24.9%).

So this is not a very promising theory.

]]>Matt, I’ve argued that individual countries might benefit from employer-side payroll tax cuts, or other similar supply-side fiscal policies. The problem of course is that they are broke.

Tom, I left a comment over at Glasner’s site.

Mark, That’s interesting data on eligible assets. If they included foreign sovereign debt the amount would increase sharply.

]]>“Oil consumption could fall to reduce the oil price. It virtually never happens outside a recession (if you’re not supply-constrained). So falling oil consumption is unlikely.

Having said that, oil demand in China was actually down in the last few months.”

I’m all confused. Are you discussing oil consumption or oil demand?

BTW, a few days ago over at Econlog David Henderson made the following comment:

“I’ve even seen one sharp petroleum economist from the American Petroleum Institute make the same mistake: he presented data on consumption and referred to it as “oil demand.”

http://econlog.econlib.org/archives/2014/04/rudebusch_on_ho.html

]]>I.e., real-gDp (where roc’s in MVt = roc’s in real-output), didn’t fall below a 3 percent rate-of-change during this pseudo tightening period.

A “tight” money policy is defined as one where the rate-of-change in monetary flows (our means-of-payment money times its transactions rate of turnover) is no greater than 2-3% above the rate-of-change in the real output of goods & services. I.e., AD rose (didn’t decelerate or contract) from June 2004 until February 2006.

And then Bankrupt U Bernanke NEVER eased.

]]>The point is that “forward interest rate guidance” (Optimal Control Path of Interest Rates), provides false signals. I.e., Keynes’s liquidity preference curve (demand for money), is a false doctrine.

Since the Fed’s research staff doesn’t know the difference between money & liquid assets, the FOMC has inadvertently fallen back on bank credit proxy exclusively – in order to steer the economy.

Required reserves (RRs), then are based on transaction deposits 30 days prior (& over 95 percent of all demand drafts clear thru these deposit classifications). RRs represent the BOG’s de facto policy driver.

Roc’s in RR = roc’s in nominal-gDp (a proxy for all transactions in Irving Fisher’s “equation of exchange”). The distributed lags for both bank debits & MVt are not “long & variable”. The lags have been mathematical constants for the last 100 years.

The proxy for real-output is exactly 10 months (courtesy of the “Bank Credit Analyst’s” [debit/loan ratio].

The proxy for inflation is exactly 24 months (courtesy of “The Optimum Quantity of Money” – Dr. Milton Friedman.

Note: their lengths are identical (as the weighted arithmetic average of reserve ratios & reservable liabilities remains constant)

]]>That is, the rate-of-change in monetary flows (MVt), or the 24 month proxy for the inflation indices (the price level), began to decelerate. And this proxy for inflation has been a mathematical constant for the last 100 years. In other words, Bankrupt U Bernanke turned safe assets into impaired assets (even bragging that his inflation record was the most stringent of any Chairman since WWII).

Note that the expansion coefficient (monetary base), doubled from 1947 to 1975 (28 years). It doubled again from 1975 to 2003 (28 years). But from 2003 on it began to accelerate. I.e., even as banks ceased to be e-bound in 1995, it wasn’t until 2003 that the expansion coefficient was delinked (as Bankrupt U Bernanke was hitting the brakes).

]]>It’s a big delta, Mark. What are you proposing as the explanation? What’s the narrative, guy?

]]>Off Topic.

Here’s an otherwise unremarkable post:

http://soberlook.com/2014/04/ecb-moving-closer-to-unconventional.html

Which is nevertheless useful for this:

This is the first time I recall seeing the amounts of ECB repo eligible marketable debt securities presented in such a simple fashion.

Non-Euro Area debt securities do not appear to be represented in the chart. My understanding is that under its temporary framework the ECB can also accept debt securities issued in all EEA and G10 countries as collateral, so that evidently would include the US, Japan, the UK, Canada, Sweden and Switzerland (Table 2):

http://www.ecb.europa.eu/pub/pdf/other/collateralframeworksen.pdf

]]>Yeah it may just mean that borrowing reserves is of no value. But if given them then that’s not the case.

Broader money has a higher interest rate though. If reserves were made a better substitute for broad money (allowing them to be widely held and used for transactions) then we wouldn’t be at the zlb.

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