The new Fed chair argued that the Fed should stop reflecting markets back at themselves. Forgotten debates show how this leads to confusing, indeterminate results.
Really good post. I was also skeptical of the task forces, as the 'problems' they are meant to address don't feel like something meant for a task force, but continuous research.
We will see who he nominates, but I find it slightly concerning.
I'm not a fan of dot plots. Historically, the Fed can predict everything except future FFR, at which they are horrible. Nevertheless, not providing forward guidance is the luxury of a stable market. In a crisis, the Fed will need to calm the market with reassuring guidance on what they're going to do. This new communication tactic will end with the next crisis.
I wonder if there isn't another reason for not explaining or predicting what you're doing. Because his actions will have no good explanation. It is the behavior of an emperor, not a public servant.
Agree. I was wondering if the silence was part of keeping the White House at bay, but his answer on that question made me think this is more personal for him. For them to get the independence that they have, they do need to be extra accountable for what they are doing with it.
The reasurance should be "do what it takes to achieve our target." A crisis is the time when future policy instrumet movements are and ought to be least preditble.
Silence isn’t the absence of forward guidance — it’s forward guidance with the labels removed, and markets will fill the blanks whether or not they’re invited to.
The Fed ought not to give guidance about future policy instrument movements becase it should not itslelf know. Future movement should depend on future events, not past policies and really not past prediction of what policy woul be. It SHOULD give guidance about what it expects future outcome of its decision to be and its target.
Without citation for causes, I.e. the “homework” the Fed does, it seems they will be unaccountable and able to act in any way they desire? Inflating away debt in secret is simply a tax without any mention of austerity measures. Engaging more minds in research and open debate is possibly beneficial. Engaging in the debate is better than simply reporting what one debater states. However most things are suspect today.
Really good post. I was also skeptical of the task forces, as the 'problems' they are meant to address don't feel like something meant for a task force, but continuous research.
We will see who he nominates, but I find it slightly concerning.
I'm not a fan of dot plots. Historically, the Fed can predict everything except future FFR, at which they are horrible. Nevertheless, not providing forward guidance is the luxury of a stable market. In a crisis, the Fed will need to calm the market with reassuring guidance on what they're going to do. This new communication tactic will end with the next crisis.
I wonder if there isn't another reason for not explaining or predicting what you're doing. Because his actions will have no good explanation. It is the behavior of an emperor, not a public servant.
Agree. I was wondering if the silence was part of keeping the White House at bay, but his answer on that question made me think this is more personal for him. For them to get the independence that they have, they do need to be extra accountable for what they are doing with it.
The reasurance should be "do what it takes to achieve our target." A crisis is the time when future policy instrumet movements are and ought to be least preditble.
Gee whiz! I can't imagine where you can find the economist you describe in your closing ....
It's like a summoning spell, or putting a PK-signal in the sky like Batman.
Indeed! I’ll have to check whether he responds.
Silence isn’t the absence of forward guidance — it’s forward guidance with the labels removed, and markets will fill the blanks whether or not they’re invited to.
The Fed ought not to give guidance about future policy instrument movements becase it should not itslelf know. Future movement should depend on future events, not past policies and really not past prediction of what policy woul be. It SHOULD give guidance about what it expects future outcome of its decision to be and its target.
I think we are going to learn that Warsh is not the smartest guy in the room.
Without citation for causes, I.e. the “homework” the Fed does, it seems they will be unaccountable and able to act in any way they desire? Inflating away debt in secret is simply a tax without any mention of austerity measures. Engaging more minds in research and open debate is possibly beneficial. Engaging in the debate is better than simply reporting what one debater states. However most things are suspect today.