John Cochrane on the stability of interest rate pegging
Here’s John Cochrane replying to a post by Nick Rowe:
The last 5 years have brought us a delicious opportunity for measurement. Once we hit the zero bound, interest rates can’t move any more. So the whole problem of empirically verifying long run dynamics is a lot easier.
What happened when the Fed kept interest rates at zero for 5 years? Pretty much nothing! OK, you see inflation going up and down, but look at the left hand scale — one percentage point. Given the colossal scale of other events in the economy, that’s nothing. Japan has been at it even longer, with similar results.
We seem to have in front of us a pretty clear measurement that long run dynamics are stable.
“Nothing” is astounding. This dog that did not bark has demolished a lot of macroeconomic beliefs:
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MV = PY. Sorry, we loved you. But when reserves go from $50 billion to $3 trillion and nothing at all happens to inflation — or at most we’re arguing about percentage points — it has to go out the window.
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Keynesian deflationary spirals. Just as much as monetarists worried about hyperinflation, Keyensians’ forecast of a deflationary spiral just didn’t happen.
I can certainly understand why Cochrane would make this argument. It seems to make a lot of sense. But that’s only because the standard model is infected by Keynesianism, which leaves it vulnerable to attack. Here’s one reply:
Yes, the Taylor Principle stabilizes prices during normal times, when interest rates are positive. And yes a rigid and positive interest rate peg is supposed to lead to highly unstable dynamics. But that’s because if you target interest rates at a positive level and if there is no interest on reserves, then you lose control over the monetary base, which flies off to zero or infinity. In contrast, at the zero bound you regain control over the base. Thus once the Fed and BOJ lost the ability to adjust interest rates, they started using QE to prevent deflation. (Of course with IOR you hit the “liquidity trap” that much sooner, but regain control of the base that much sooner.)
That’s the sort of reply I’d expect from Nick Rowe. But then I’d also expect Nick to go further, and point out that this just shows how dangerous it is to describe the stance of monetary policy by using interest rates. Here’s what actually makes the Taylor Principle work:
1. When inflation is above target you need to reduce the growth rate of the money supply (relative to the growth rate of money demand) enough to bring inflation back down to the target. It just so happens that the sort of policy that would reduce the money supply growth by an adequate amount is also one that will result in nominal interest rates rising in the short run (due to the liquidity effect) by roughly 150% of the rise in inflation. But that rise in interest rates is not why inflation falls back to the target path (it’s an epiphenomenon), it falls back because you’ve reduced the growth rate of the money supply relative to demand. Inflation falls back for monetarist reasons, not Keynesian reasons.
2. Now suppose you are at the zero bound. The Keynesian model requires something radically different, whereas the monetarist model just keeps plugging along with the same old method—adjusting the money supply relative to changes in money demand. No ad hoc additions are needed for the monetarist model, unlike the Keynesian model.
But what about Cochrane’s criticism of the M*V=P*Y model? What about his observation that reserves have soared while prices have hardly budged? Unfortunately, there is no such model. No one has ever proposed an M*V=P*Y model. No one has ever claimed that inflation is proportional to reserves. The most distinguished monetarist of all time was Milton Friedman, who famously argued that reserves are not a good indicator, and that money was tight during the 1930-33 deflation despite the huge rise in bank reserves due to Herbert Hoover’s QE. There’s nothing new under the sun. Nothing to be explained here; just move right along.
Sophisticated quantity theorists have always understood that the demand for bank reserves can be very large at zero nominal rates, especially when interest is paid on reserves (but even if it is not.) At the zero bound expectations (which are always about 98% of monetary policy) become 99.5% of monetary policy. So I guess I was exaggerating a bit; the zero bound really is slightly different, but only quantitatively, not qualitatively.
An interest rate peg can lead to hyperinflation or hyper-deflation precisely because it can lead to upward or downward spirals in the monetary base. That spiral does not generally occur at the zero bound, and hence there is no “stability” mystery to explain. Unless you are a Keynesian.
I don’t want to sound too negative here–for some reason I had never really thought about that flaw in the standard Keynesian model until I had to think about how to respond to Cochrane’s post. That’s what makes the blogosphere so great.
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6. November 2014 at 19:52
“What happened when the Fed kept interest rates at zero for 5 years? Pretty much nothing!”
You mean when the Fed inflates like gangbusters, and we look at a hole in the ground, we see no changes?
6. November 2014 at 19:58
Here’s Nick’s actual response:
http://johnhcochrane.blogspot.com/2014/11/the-neo-fisherian-question.html?showComment=1415324853368#c5643175478073231889
“But yes, monetary economies are less unstable than regular theory says they should be, given central banks setting nominal interest rates. I don’t know why.”
7. November 2014 at 00:33
“– reserves are not a good indicator”
What is then a good indicator?
7. November 2014 at 02:20
Jussi: You must be new around here. There is a quote from Ben Bernanke that Scott likes to use when explaining what is the best indicator of the monetary policy stance:
“Ultimately, it appears, one can check to see if an economy has a stable monetary background only by looking at macroeconomic indicators such as nominal GDP growth and inflation.”
7. November 2014 at 03:55
“But when reserves go from $50 billion to $3 trillion and nothing at all happens to inflation “” or at most we’re arguing about percentage points “” it has to go out the window.”
Oh, well then I guess Cochrane would say that if the Fed kept reserves at $50 billion, meaning they did not engage in any additional OMOs, then by symmetry nothing at all would have happened to prices.
Right?
He would have said the economy would have underwent serious deflation. So that jump in reserves did do “something” to inflation. Depends on the baseline counterfactual.
7. November 2014 at 04:07
J.V. Dubois: Yep, I have been following other blogs more keenly.
But then it seems to me that interest rate (as roughly gdp + inflation) should be a quite good measure of the monetary stance. But I thought Scott loathes interest rates as a target for the CB?
7. November 2014 at 04:35
MF, I think you have achieved a breakthrough. Keep going. Deflation is bad because…money illusion. Thus, the title of the blog.
7. November 2014 at 05:03
‘Oh, well then I guess Cochrane would say that if the Fed kept reserves at $50 billion, meaning they did not engage in any additional OMOs, then by symmetry nothing at all would have happened to prices.’
I’m not positive, but I think the implication of his model is that if the fed had stuck to their 4% target through 2010, requiring some *reduction* in reserves I think, inflation would have stayed up above 2% all this time. Or maybe he agrees with the first couple of rate cuts bc inflation was running slightly hot at the time and the first few rate cuts helped tame it and then we just went to far and brought the deflation down on ourselves by going to 0 and doing QE?
I know I’m torturing the data a bit by talking about how cpi moved and not core pce, but trying to imagine how omos might have had the opposite effect for years is a little difficult for me.
7. November 2014 at 05:05
Scott,
The blogosphere is an enjoyable carnival. In this post Russ Roberts tweaks Krugman:
“Two countries cut spending and grew. Three cut spending and shrunk. And of course causation might be running in the other direction. Shrinking economies have trouble spending money especially when their credit ratings are not so healthy.”
http://cafehayek.com/2014/11/the-prima-facie-case-for-keynesianism.html
I enjoyed your econlog post on “it doesn’t matter” theories. A corollary argument is that economic theories matter when they do matter but otherwise they may not matter much. Many a pundit has been wrong making economic predictions based on tax policy. Same for predictions made on fiscal policy and of course we have the Federal Reserve and its expressed dissatisfaction with how the economy has responded to its measures.
There is a complexity and detail in economic reality that cannot be represented in an economic model. Of course this does not justify ignoring economic theory or not trying to get economic policy right. It does suggest that bold claims of the power of an economic measure should be tempered by the awareness that the world is not as simple as theory assumes it to be.
7. November 2014 at 06:06
Not a deflationary spiral, but de-leveraging – and not a spiral more of a drag.
7. November 2014 at 06:34
“It does suggest that bold claims of the power of an economic measure should be tempered by the awareness that the world is not as simple as theory assumes it to be.”
Gee whiz Dan W, what a useful insight! Models have simplifying assumptions? Tell me more!
7. November 2014 at 06:36
Dear Commenters,
5-Year inflation expectations (at FRED) surged from 1.49 on 11/4/14 to 1.54 on 11/5/14.
That’s a rather curious result, since the Republicans beat election expectations the night of 11/4/14. Why do you think inflation expectations shot up? Was it all Draghi anticipation?
7. November 2014 at 06:40
Travis,
5 basis points? Could be anything don’t you think? Maybe that was the morning we found out that the wheat crop used for pasta flour was very bad this year.
7. November 2014 at 06:46
To expand on my above comment, I am looking at aggregate demand as the sum of income plus the change in debt. Up to about 2010 we had deleveraging. Since then credit has been growing at a positive pace.
7. November 2014 at 06:59
It’s simpler than even Scott is making it, where is ‘r’ in MV=PY?
7. November 2014 at 07:30
Nick,
Fair enough but the TIPS market’s response to the Bank of Japan news a week ago was very very very obvious……
7. November 2014 at 07:32
Jussi, Yes, I loathe interest rates, and would prefer the Fed target NGDP expectations.
Travis, I believe oil prices often drive high frequency moves in TIPS spreads, but I can’t speak to that particular move.
Patrick, Yup, r is not there, and even if it was MV=PY is not a theory.
7. November 2014 at 08:47
Ben,
A certain group of monetarists claims that the 2008 financial collapse in particular, and economic recessions in general are preventable by NGDP leveling. That is a very bold claim.
7. November 2014 at 09:20
John Cochrane is proof (as if we needed more) that economics is just politics in drag.
Start off with your gut feelings, and build a theory around them.
It makes me wonder what value do economics models have, since nobody seems interested in testing them at all.
Oh, and Dan W keeps on being retarded. Quite boring.
7. November 2014 at 13:36
Keynes’s liquidity preference curve (demand for money), is a false doctrine. The money supply (& commercial bank credit), can never be managed by any attempt to control the cost of credit (i.e., thru pegging the interest rate returns on government securities; or thru “floors”, “ceilings”, “corridors”, “brackets”, IOR, etc).
———————-
And we knew this already — See: “Paying Interest on Reserve Balances: It’s More Significant Than You Think” by Scott T. Fullwiler
http://bit.ly/1sMONzw
(Unlike during the Great-Depression, and contrary to the pundits), with 18 trillion dollars of public debt, there’s a surfeit of credit worthy borrowing to be utilized (eligible collateral for the FRB-NY’s “trading desk”, or operations of the buying type). What’s screwed up is that the Primary Dealers are always (for various reasons), able to outbid the non-bank public during auctions (and the NB counterparty is where the Central bank would get the most “bang for its buck” – injecting new money and arresting disintermediation).
The Fed’s new policy tool “O/N reverse repurchase agreement facility” allows the Fed to bypass the traditional PDs (which were all commercial banks, and most had international footprints), thereby allowing the Central bank to drain the money stock whenever inflationary pressures get the upper hand (unfortunately, this facility works predominately in only one direction).
Unlike open market operations between the Reserve Bank and the commercial banks (which are asset swaps), OMOs between the RB and the NBs create both new money, and new IBDDs. Before the PDs were established as a “go between” in 1960, the Fed dealt with the NBs directly.
So the Fed’s “open market power” has been emasculated – both by remunerating excess reserves, and by allowing the PDs to usurp monetary policy. In other words, there’s no such phenomenon as a liquidity trap.
See also: The Fed, Primary Dealers, and the Ineffectiveness of Monetary Policy Dan Crawford | April 8, 2013 7:58 am by Mike Kimel
7. November 2014 at 13:41
“Jussi, Yes, I loathe interest rates, and would prefer the Fed target NGDP expectations.”
But how to hit the NGDP expectations without thinking in terms of M*V=P*Y (as “No one has ever proposed an M*V=P*Y”)?
7. November 2014 at 14:30
Jussi, you ask what a good indicator is, well this guy has found that currency in circulation is a pretty good one across a bunch of economies and time periods:
http://informationtransfereconomics.blogspot.com/2014/11/in-which-i-agree-with-john-cochrane.html
Link above is his fresh off the presses take on Cochrane’s post.
7. November 2014 at 16:03
What? MV=PT.
So if M goes way up, but prices (P) stay flat, and T also, then V is going down.
Call me simple, that sounds like 2008 to present.
What is Cochrane talking about? What is anyone talking about?
7. November 2014 at 17:18
Dan W,
Market monetarists do not believe either of those two things. So either you don’t understand the market monetarist view, or you deliberately misrepresent it. Which one is it?
Funnily enough, even if that was the market monetarist view, your comment that gravely warns everyone that models have simplifying assumptions would be equally as vacuous and pointless. What’s your next piece of wisdom? The sun may come up tomorrow?
7. November 2014 at 17:35
“Sophisticated quantity theorists have always understood that the demand for bank reserves can be very large at zero nominal rates”
Wouldn’t it then be better to conduct monetary policy with counterparties that have a more stable money demand? Like the general public.
7. November 2014 at 17:46
In the “equation of exchange”, M represents our means-of-payment money supply. And Vt represents money actually exchanging hands. Neither definition fits the author’s modeling (conforms to rigid theoretical concepts).
M is overstated by the volume of “saved” demand deposits (reflecting an indifference on the part of saver/owners where they park their money, esp., given historically suppressed yields). E.g., disposable income doesn’t track with M1, etc.
And Vi is a contrived (fabricated), figure. If real-gDp has risen, then so has Vt (because consumers aren’t complaining about their overtime). I.e., prices have remained subdued, so more product can only be moved by a larger number of transactions [ +T and not P ]. Regardless, that’s the only way DD turnover behaves coming out of a recession.
7. November 2014 at 18:00
“No one has ever claimed that inflation is proportional to reserves”
I like to denigrate what Donald Kohn claimed: “I know of no model that shows a transmission from bank reserves to inflation”
Oil and commodities, both bottom in DEC.
7. November 2014 at 20:08
http://www.youtube.com/watch?v=Oz4-Tru_30A
GREENSPAN: “Yes… Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.”
8. November 2014 at 04:07
Very good post Scott. My own post is partly a riff off, but mostly a rippoff, of your post. http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/11/black-holes-and-neo-fisherites-are-a-monetary-phenomenon.html
8. November 2014 at 04:44
Daniel wrote:
“John Cochrane is proof (as if we needed more) that economics is just politics in drag.
Start off with your gut feelings, and build a theory around them.
It makes me wonder what value do economics models have, since nobody seems interested in testing them at all.”
Disagree. I would guess that my politics are very much to the left of Cochrane’s, but I like a lot of what he writes. I don’t buy Neo-Fisherism, but I don’t think his posts on it are a political statement.
8. November 2014 at 05:20
Michael,
I don’t think that Cochrane sees himself as a political operative – but I never said that in the first place.
What I’m saying is that, essentially, human are RATIONALIZING, not rational. And the fact that even a smart guy such as Cochrane manages to write total nonsense when it comes to monetary issues is proof of that.
People rationalize their gut feelings and call them “theories”. And of course they don’t want to test them, since it would put them in a bad light.
8. November 2014 at 05:36
Jussi, I’ve proposed having the Fed target the price of a NGDP futures contract.
Of course since MV=PY is an identity, all policies including Keynesian policies must in some sense be consistent with MV=PY. My point is that it is not a theory.
NGDP targeting is also consistent with C+I+G+NX=Y
CMA, No, because the choice of counterparty has nothing to do with where the base money ends up. Instead, it’s arguably an argument for negative IOR, to insure the base money ends up as cash.
8. November 2014 at 06:37
Scott,
I’ve said this many time before, but if you base you’re argument on Base minus ER, the Cochrane argument goes away.
8. November 2014 at 07:10
Daniel:
“What I’m saying is that, essentially, human are RATIONALIZING, not rational. And the fact that even a smart guy such as Cochrane manages to write total nonsense when it comes to monetary issues is proof of that.
People rationalize their gut feelings and call them “theories”. And of course they don’t want to test them, since it would put them in a bad light.”
Daniel what did I tell you about sel-reflection? Do you believe I said what I said just to antagonistic like you?
If what you argue above is true, which I am assuming you believe it is, then you yourself must be “rationalizing of your gut feeling” in that very argument.
Thus, it must have as little rational value as you believe the one Cochrane made.
No wonder your posts are full of illogic and flaws. You are an attacker of the human mind, and you undercut your own mind in that very attack. When we assume for a moment the content of your argument is true, then it follows that making that argument is itself is what the content says, I.e. you are just rationalizing a gut feeling, and you refuse to put it up to solid critiques and challenges in your own mind.
Hey guess what everyone, Daniel has just let us all know that everything he has ever written in this blog, including his responses to me, have in fact been nothing but his gut feeling that he is trying to rationalize and who refuses to listen to critiques.
But wait, there’s more! Any response he gives to my post right here, as I suspect will occur, that also must be nothing but a rationalizing of his gut feelings. It’s gut feelings all the way down for his garbage ideology.
PS Daniel, I always knew the biggest flaw in your thinking was your self-contradicting epistemology. That is why you “feel” such animosity towards my arguments. It is because my arguments are grounded on a much different epistemology, one that does not refute itself by the way. That is why you can’t refute anything I say. It is because your epistemology refutes itself and negates its own ability to possiboy refute what I write. Hence, the only thing left are your gut feelings, your passions, your hatred, your fears, which is why most of what you do is name call, spew vitriol, without actually engaging arguments that are by your own choice above your head and too sophisticated for you.
8. November 2014 at 09:47
Cochrane makes the mistake that many people do of thinking that, or at least speaking as if, monetary policy is limited to manipulation of the short term interest rate. Now it is true that the Fed has faced great political opposition to using “unconventional” instruments and has not committed to maintaining a steady trend of NGDP, but that does not mean that the Fed could not have been more active if the political climate had been less unfavorable.
8. November 2014 at 12:50
dtoh, What Cochrane argument? The argument that interest rate pegging is destabilizing?
8. November 2014 at 13:59
Thanks Scott, and sorry for my ignorance. The NGDP futures sounds like an interesting idea. I like it, markets are horrible in predictions but probably better than anything else.
Yet I wonder whether NGDP futures can give us new information not already found in interest rates – the main components are the same? I guess this comes back to Neo-fisherian question. I get how the CB can easily get yields down but struggles to get them up – why would it be different with NGDP futures implied growth?
And why the base money and not true helicopter money? E.g. monetized lump sum for everybody? I’m pretty sure that giving enough CB charity the inflation would bounce.
Thanks Tom, I read it. I liked Cochrane’s post a lot but Jason’s models are way over my head. I hope he is onto something.
8. November 2014 at 16:24
“because the choice of counterparty has nothing to do with where the base money ends up”
Which side steps the real macro-economic issue (i.e., money creation – where the counterparty has everything to do with it). And economist’s definition of “base money” is absolutely laughable, not just theoretically, but empirically so.
The currency component has no expansion coefficient. Whether the public chooses to hold more hand-to-hand currency as opposed to less bank deposits in meeting accruing & accrued liabilities, only changes the composition of the money stock, not its volume. The currency part of our money supply is left free to seek its own level based upon the “needs of trade”. Its issuance does not increase its volume. It merely substitutes one form of money for another form.
The basic process by which currency is put into & taken out of circulation is through the banking system. And all currency gets into circulation, directly or indirectly, through the liquidation of time deposits, by the cashing of demand deposits. There was one exception in demand deposit creation; those rare historical instances where the U.S. Treasury borrowed from the Federal Reserve Banks. However, it cannot be said (as of time deposits), that increases in the public’s holdings of currency reflect prior CB credit creation.
Indeed, unless a bank holds an equivalent volume of IBDDs, any outflow is contractionary (not expansionary). I.e., an outflow of currency will cause bank credit contraction (unless, as is typical, the FRB-NY deliberately offsets withdrawals with concurrent expansions of reserve bank credit). And the trend of currency has been up since 1930, so return flows are purely seasonal.
See: http://bit.ly/yUdRIZ
Quantitative Easing and Money Growth:
Potential for Higher Inflation?
Daniel L. Thornton FRB-STL
8. November 2014 at 16:27
Greenspan had an excellent article on the gold standard in the WSJ on 9/1/81.
8. November 2014 at 17:04
Rates-of-change in monetary flows [M*Vt] = roc’s in gDp (gDp serves as a proxy for all transactions in Irving Fisher’s “equation of exchange”).
Based on roc’s in M*Vt (the lags of which have been mathematical constants for over 100 years), Greenspan never tightened monetary policy (i.e., despite 17 raises in the FFR (June 30, 2004 until June 29, 2006), -every single new rate adjustment was “behind the inflationary curve”).
Likewise, Bernanke never eased policy (in fact, continued to drain liquidity despite the 7 reductions in the FFR (which began on 9/18/07; until 4/30/08).
I.e., Bankrupt U Bernanke carried out a contractionary money policy for 29 contiguous months turning safe assets into impaired assets (roc’s in money flows paralleled precisely the decline in the Case-Shiller Home Price Indices), then, as the economy was already decelerating, tightened dramatically further as the U.S. fell into a recession.
In short, even a temporary pegging of a series of FFRs over time, forces the Fed to abdicate its power to regulate properly the money stock.
8. November 2014 at 22:25
Greenspan had an excellent article on gold and economic freedom in the “Objectivist” newsletter in 1966.
8. November 2014 at 22:27
“When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates. The “Fed” succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market, triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930’s.”
8. November 2014 at 22:28
“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
9. November 2014 at 02:53
One question is: QE’s helped US economy to hit 2% inflation target no matter the level of how other targets achieved? Not exactly, because Fed’s targeting was probably to boost economic conditions -climate and trust (rightly so). By increasing the quantity (apples and oranges) but in the same price, Fed provided liquidity, stability, improve economic environment etc
But to the first question, how effective was the transmission of QE’s and its correlation with reserves policies in the inflation orientation?
Money supply growth- for my point -does not have a considerable effect to the increase in nominal interest rates in the short run, but basically to the rise of inflation.
The M1 money multiplier was less than 1 which means that Fed is creating more money from commercial banks for various (probably good) reasons.
Possibly the trend in M1 multiplier somehow connected with what defines the intrinsic value of the dollar which affected by the fluctuations in world markets and exhange rates, but also by two opposing functions: the quantity-growth of money supply you mention in 1,the multiplier which creates, if that growth reduces(?) the purchasing power of the (many circulated dollars), contrary to the effects of aggregate demand.
They are having an offseting functioning? Probably.
My point, the level and the cource of productivity is more definitive and indicative for the inflation targeting if this should be one of the first targets. Full employment for many advanced countries is well below 5% possibly 4,5%.
Reserves have an effect in altering the pragmatic value of a currency in given periods where the economic climate is weak, but also to give banks the tools, better operating their balance sheets requirments.
9. November 2014 at 13:26
The dollar ceased to be convertible into gold solely because of the Pentagon’s far flung military exploits and overseas bases. Beginning in 1950 the private sector had run trade surpluses for 25 out of 26 years. I.e., the prosecution of war and our communist containment polices created a surfeit of foreign short-term claims against the dollar ultimately forcing Nixon’s hand.
9. November 2014 at 20:58
Speaking as a completely disinterested and mostly uninterested observer, ‘Major’, I thought it might be useful for me to help you out with a puzzle you seem to be facing:
“…why [Daniel] “feel[s]” such animosity towards my arguments.”
The reason he ‘feels’ such animosity towards your ‘arguments’ is because you’re basically a complete a*****e troll who sounds like a twelve-year-old who has swallowed but failed to completely digest an econ 101 textbook and a dictionary.
Glad I could be of service here! If you ever have any other questions, feel free to go away.