Some of these stop-start price movements may reflect a lack of desire to place large new bets as the year draws to a close. However, the dollar’s pattern overnight and Tuesday may also demonstrate that despite what Mr. Bernanke said, the positive payrolls report still fuels the case for the U.S. to raise interest rates ahead of some of its peers, which in turn boosts the dollar. WSJ1
Now if you’re like me, Katie’s narrative is about as gripping as the fridge motor cycling in the morning; however, …
Just have a look at what’s unfolding in the 4th hour of VI Charlie as event MC Vince Reinhart tees up the analysis of the Fed’s role in the recovery.
So central banks actually have a whole profile of inflation expectations to influence. The real long term rate, presumably the rate that matters for spending decisions, can go down because longer term expectations of inflation go up, or near term expectations of inflation go up.
As a consequence, in the next slide, [slide 13] this arithmetic reveals some ironic bedfellows.
Both the critics of unconventional policy and those who call for constructive irresponsibility talk as if the central bank can only shift the entire term structure of inflation expectations in a parallel fashion. That is, the only way you can generate inflation expectations is if you’re seen to be generating [3:35:00] inflation now and into the future forever.
MORE COMING SOON!….
That’s right to the limit of segment #43, and the furthest I’ve coded to now. You can listen ahead on the video, of course (and look ahead on the slide deck). Hopefully the transcription will keep slogging along. This bit has suddenly become unexpectedly interesting.
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[1]: "Dollar Lacks Clear Trends", by Katie Martin, Wall Street Journal, December 8, 2009.
John-
Perhaps it’s odd, but in all the discussion about an exit policy, I was really struck by this comment from “Charles”:
I had the opportunity to watch Japanese politics up close and personal when I lived in Japan for several years. I was surprised to see that rice was still “rationed” from the days of WWII. It was a way of controling the price, even though there was no shortgage of rice.
Because Japanese rice farms are tiny [I think they average under an acre] there are a whole bunch of rice farmers- so their political clout exceeds their economic cloud. All my friends in Japan were pulling for cheaper rice because they had families to feed. The government though consistently favored rice farmers over consumers.
I agree with Charles. I believe that lower house prices would be much better for consumers, especially for lower income Americans. Policies continue to favor the lenders and industry special interests.
Unlike Japan where they can set the price of rice however, I think forces are greater than the government can fight. That isn’t stopping them from trying however.
It makes it tough for investors as government policy keeps the market irrational.