1 Ikus http://bilbo.economicoutlook.net/blog/?p=31696#more-31696.

2 Ingelesez: “… all the predictions and scare campaigns that were being issued by mainstream economists and their conservative ‘think tank’ conduits about the impending disaster that would accompany the near zero interest rate regimes that the US Federal Reserve Bank had implemented it would make a great comedy sketch.”

3 Ingelesez: “There should be no surprise with the massive predictive failures of the mainstream economists in this regard. They clearly did not understand the underlying dynamics that govern the way the central bank interacts with the commercial banks.“

4 Ingelesez: “The problem is that these conservative forces are so dumb they don’t have adaptive learning mechanisms and so even in the fact of evidence contrary to their Groupthink they keep pumping out the same nonsense. The other problem is that they tend to be well funded by the right-wing establishment that they exhibit disproportionate influence on the public policy debate. That influence has turned to demands that the US Federal Reserve Bank (the central bank) increase interest rates and reverse its quantitative easing – apparently because hyperinflation is just around the corner. Nothing could be further from the truth.”

5 Ingelesez: “At present the US economy is some way into a very slow and relatively tepid recovery. But it has still some way to go and while interest rate changes have a relatively weak impact on overall growth any anti-growth noise is undesirable. It is also not justifiable given the central bank’s own logic.”

6 Ingelesez: “It would be better for humanity if it [the central bank] left rates at their current level (or adjusted the cash rate down to zero – that is, abandon the range between 0 and 0.25 per cent), called up the Treasury and told them they were seeking a merger and proceeded to scrap the entire federal reserve system.”

7 Ingelesez: “We came into this era of inflation targetting as a consequence of the Monetarist policy bias that central banks should ‘fight inflation first’, which was code for using unemployment as a policy tool rather than a policy target that it was during the full employment (non neo-liberal era).”

8 Hona hemen ebaluaziorako urratsak: 1. To avoid month-to-month variability, it considers “average inflation over longer periods of time”. 2. It examines “the subcategories that make up a broad price index to help determine if a rise in inflation can be attributed to price changes that are likely to be temporary or unique events”. 3. It examines “a variety of ‘core’ inflation measures to help identify inflation trends. The most common type of core inflation measures excludes items that tend to go up and down in price dramatically or often, like food and energy items.”

This process is followed by central banks almost everywhere.”

9 Ingelesez: “We learn that inflation in the US is very low at present (0.2 per cent per annum) but the underlying ‘core’ rate is a steady rate varying between about 1.6 and 1.8 per cent. It has been stable for the last three years at least.”

10 Ingelesez: “The three major rounds of QE in the US were dated as follows:

• Quantitative Easing 1 (QE1, December 2008 to March 2010) – This was announced on November 25, 2008. The program was expanded on March 18, 2009 as described in this FOMC press release.

• Quantitative Easing 2 (QE2, November 2010 to June 2011) – The FOMC announced on – On November 3, 2010 – that it “intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.”

• Quantitative easing 3 (QE3, September 2012 and expanded on December 2012 and terminated in October 2014) – The FOMC announced on – September 13, 2012 – that it “agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month”. This would continue “If the outlook for the labor market does not improve substantially”. This phase was expanded on – December 12, 2012 – such that the FOMC “will purchase longer-term Treasury securities … initially at a pace of $45 billion per month”. QE was terminated in the US in October 2014.2.”

11 Ingelesez: “It is hard to mount an argument that the QE episodes have increased inflationary expectations. The last phase (QE3) didn’t alter short- or long-run inflationary expectations one iota – they remain low and anchored despite the massive increase in the asset-side of the Federal Reserve balance sheet and the commensurate swelling of bank reserves.”

12 Gogoratzekoa, Quantitative Easing (QE) inozoentzat: https://www.unibertsitatea.net/blogak/heterodoxia/2015/03/27/quantitative-easing-qe-inozoentzat/.

13 Ingelesez: “An unemployment rate of around 5 per cent was considered to be a ‘long-run’ policy target. We can disagree with that assessment (see The dreaded NAIRU is still about!) but within the Bank’s own logic, it is hard to argue that the ‘low’ unemployment rate has been breached from above.

The aggregate unemployment remains at 5.3 per cent (July 2015) and has been slowly falling for the best part of 18 months. Earlier in the recovery it fell quite quickly.

But if we dig deeper all isn’t that rosy in the US labour market.”

14 Ingelesez: “…. broader indicators demonstrate that the US labour market has still not recovered its pre-GFC position. (…) Clearly, it has still not returned to its pre-GFC low of around 7.9 per cent which was recorded in December 2006. So any measure that seeks to slow growth down and undermine the relatively modest employment growth overall will impact disproportionately on the most disadvantaged workers in the labour market first.”

15 Ingelesez: “… standard MMT principles, is that – The natural rate of interest is zero!”

16 Ingelesez: “… Modern Monetary Theory (MMT) theorists consider monetary policy to be a poor tool for counter-stabilisation because it is indirect, blunt and relies on uncertain distributional behaviour.”

17 Ingelesez: “MMT tells us that fiscal policy is powerful because it is direct and can create or destroy net financial assets in the non-government sector with certainty. It also does not rely on any distributional assumptions being made.

Further, MMT considers the desirable economic state to be full employment which means some irreducible low unemployment, zero hidden unemployment and zero underemployment.”

18 Ingelesez: “MMT also tells us that deviations from full employment reflect failed fiscal policy settings – not a large enough fiscal deficit (other things equal).

The size of deficit has to be judged in terms of the desire of the non-government sector to save in the currency of issue. So if the deficit is inadequate and unemployment arises we know the net public spending has not fully covered the spending gap.”

19 Ingelesez: “We also know that fiscal deficits add to bank reserves and create system-wide reserve surpluses. The excess reserves then stimulate competition in the interbank market between banks who are seeking better returns than the support rate offered by the central bank. (…) It makes much better sense not to offer a support rate at all. In that situation, net public spending will drive the overnight interest rate to zero because the interbank competition cannot eliminate the system-wide surplus (all their transactions net to zero – no net financial assets are destroyed).”

20 Ingelesez: “So in pursuit of the policy goal of full employment, which we might consider to be a ‘natural’ goal for a collectively-minded society desiring high levels of well-being and inclusion, fiscal policy will have the side effect of driving short-term interest rates to zero.

It is in that sense that MMT concludes that a zero rate is ‘natural’.”

21 Ingelesez: “If the central bank wants a positive short-term interest rate for whatever reason (MMT advocates against that) – then it has to either offer a return on excess reserves or drain them via bond sales.

The MMT preferred position is a zero interest rate with no government bond sales. In that environment, the government would then allow fiscal policy to make all the adjustments. It is much cleaner and effective that way.”

22 Ikus How Much Does Janet Yellen Care About the Selloff?: http://www.bloomberg.com/news/articles/2015-08-25/lesson-for-yellen-trigger-happy-central-bankers-reversed-course.