A weekly thread to discuss financial matters - from personal all the way up to global.
Ground Rules
*Remember that we're all just Internet randos. Don't bet your life savings on a hot tip from this thread.
- Keep culture war in the culture war thread. Yes, global events may impact our personal finances, but that does not mean we have to incessantly harp on culture war aspects here. If you are going to discuss it, please stick to the practical impacts of it on an individual level.
- Be kind. Remember that everyone here comes from different circumstances. We all have different resources available and different risk tolerances.
- Don't let the perfect be the enemy of the good. Better is better. Celebrate people when they take a step up and work to move their finances in the right direction. Don't flame out because they haven't followed what you consider the optimal path. Everybody has to start somewhere.
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Notes -
What are the fiscal problems we're looking to fix? Trying to get inflation back down to roughly 2%, and optimistically try to get unemployment down a bit more, to like 3%?
I would definitely give the neo-fisherians a shot, and try dropping the policy rate to somewhere around 0-1.5%. Cochrane's modeling also supports Bessent's moves to phase out longer-maturity securities in favor of shorter bills, in order for interest rate changes to have fewer conflicting effects. Any debt monetization beyond that is pointless, and under current various rules there are probably enough institutions that prefer/need the bonds that I wouldn't suggest bothering with more QE.
Predictions based on the supposed perpetual dominance of fiscal policy over monetary policy? I guess stuff like the prediction that the eurozone was set up poorly and would dramatically struggle to deal with the first big crisis, that you should prepare for a crash if austerity politicians start winning again and fomenting a fear of large numbers, and that otherwise the US with a demonstrated willingness to keep running large deficits (to supply the desired savings to the domestic private sector and the rest of the world while maintaining solid aggregate demand) is exactly where you want to be for the best economic growth & business investing environment.
No idea about Japanese exchange rates, looks like they started accumulating US treasuries again in '09/10, which would be intentionally devaluing the yen to make their exports more competitive? And this year they finally did a massive sell-off of some of their foreign reserves to push the yen back up? I'm more of a fan of just leaving exchange rates purely floating, but I'm open to some mercantilist wisdom of keeping your industrial base stronger than what might happen naturally.
I have to admit you've given me some interesting food for thought.
Unemployment and inflation are low, so no problems there.
The bigger issue would be a sort of economic constitutional crisis. Government services are supposed to be paid for by taxes. When taxes are inadequate to cover expenses, then Congress is supposed to raise taxes or cut services. At some point debt grows to the point where Congress is forced to confront this. No one ever voted on "let's just keep printing money forever to pay for it".
Using only taxes to pay for services, then there is a hard cap on "Boomer luxury communism". Using taxes + money printing, then this cap is much higher. This money printing is a form of tax, and the government spending is a form of non-productive consumption. In the end, higher taxes and greater non-productive consumption will lead to lower economic growth.
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