. . . does the follow statement get made on the internet Wall Street program called “Breakout“:
You can’t reason from a price. I think that what we have to do is expect that the Fed really could start QE3. Now the response of course, Matt, is aren’t Treasury rates low enough . . . But remember that these low rates are really the symptom of this nominal GDP shock. So I think that if the Fed starts even injecting more liquidity, I think people are going to have expectations that we are going to get [higher] velocity, and that will start edging rates higher.
That was Lee Munson at around the 1:45 minute market. Remember those magazines you’d read as a kid in the doctor’s waiting room, where you’d look for 15 hidden objects in the background? Let’s count how many signs of my existence we can find in this quotation. Put them in the comment section.
On a serious note, I thought his interview was very good, even the parts unrelated to the Fed.
Then there’s Matt O’Brien’s wonderful new piece at The Atlantic. Good to see him mentioning the amazing Evan Soltas. I didn’t get a mention, but I detect a subtle influence just the same. Here’s Matt:
EASE OR EASE NOT: THERE IS NO TRY.
The ability to manipulate interest rates is insignificant next to the power of expectations. The latter is never out of ammo, because the Fed can always promise to turn on the printing press and buy stuff until people get the message. It’s not magic, but it’s the closet thing we have to it. The only reason the Fed has failed so far is that it hasn’t been determined to succeed. It’s tentatively tried things instead. Switzerland shows that there is another path.
Use the force, Ben. Use the force of inflation expectations.
And here’s what I wrote last year:
The Fed needs to think long and hard about WHAT NEEDS TO BE DONE, and then work out the policy framework that best allows them to meet their objective. But they won’t get anywhere until they decide where they want to go. Do they think we need more AD, or not? As Yoda said: “Do or do not. There is no try.”
And even earlier. Actually Matt hadn’t read my post, this is one of those “great minds think alike” cases. But I still think Munson was influenced.
PS. People have told me that I should copyright; “Never reason from a price change.” The idea seems a bit far fetched to me. But if someone who knows a lot about copyrights thinks it’s possible, please let me know so I can start charging other bloggers.
PPS. My previous post has an update on Summers, which Summers haters might find amusing. And yesterday I predicted Yglesias would link to Soltas. It took just 24 hours. I’ll try to get off my ego trip and get my feet back on the ground tomorrow.
HT Lars Christensen.