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Jean Turlington
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Monetary policy has played a huge role in the recovery we have been experiencing since the recession. The FED has tried to work very hard to keep the inflation rate steady, while decreasing the unemployment rate. There are always opportunity costs and consequences to what people do to effect the macroeconomy, and we are seeing some of those costs now. One of those is the liquidity trap, right now being at the zero bound in terms of interest rates for quite a while. Larry Summers even thinks that we are going to be there for quite a while into the future. This issue is a serious one, but the things the FED did that lead to this helped recovery. Another thing discussed is the idea of changes in the exchange rate as a result of monetary policy. I agree with the writer when he says that the first two concerns about changes in the exchange rate are not as relevant. Especially the idea that there will be a change in the inflation rate. If there were going to be an increase in inflation we would definitely seen it by now, but currently the FED is having a hard time reaching its target inflation rate of 2% because of all of the excess reserves banks are keeping. The third argument does have some considerable merit though. But the programs that the FED has in place now and the way that technology has improved these things can be managed to a certain extent. There are capital controls and macro prudential tools now that can limit movements in exchange rate and financial system disruptions. This helps address the third concern about disruptions in the real economy and financial markets. In conclusion there are always opportunity costs to actions by the FED about the economy but I think right now they are headed on the correct track.
This article about the minutes of the meeting shows that the FED has a lot to think about in terms of the policies that it puts in place as it goes forward. The FED is in a situation that is not quite like any other situation that it has been in before, because of this no matter how much they study and analyze what they decide to do, there is no way that they will be able to know exactly the consequences. I understand that the FED might be concerned that if it continues much longer with its current policies they might get out of hand and cause inflation, especially when the article discusses the idea that one of the troubles with the current quantitative easing is that it is hard to get out of quantitative easing, a serious concern. Although I recognize the concerns of the FED, I do not think that tapering back is what is needed. The inflation rate is still below the target of 2%, and many banks are keeping excess reserves, limiting the effect of the multiplier that could result if the FED keeps pumping money into the economy. With the economy still struggling I do not think that the FED should ease up on its policies yet, especially when looking at those four Yellen Charts it is clear that the economy has not yet recovered and should be helped.
This article helps explain a lot about how the FED is working to achieve its dual mandate of keeping unemployment low as well as stable prices with not too much inflation or deflation. The FED's job is particularly interesting right now because its normal method of working to change the interest rate in the economy and federal funds rate is feasible. It is not because the interest rate is already basically zero and the types of policies that would help the economy and increase jobs would be lower interest rates, but this cannot happen because there cannot really be negative interest rates because no one will lend if that is the case. Instead this quantitative easing is used. I think it is a very interesting way to get around the fact that the FED cannot lower the interest rates any further. It is not quite as effective overall, but it still works to address the dual mandate given to the FED. This makes sense to increase reserves and therefore increase stock values as well as effecting the exchange rate, increasing the amount of exports and therefore the amount of jobs in the export field. My one question is that it increases expected inflation and therefore causes more consumer spending. In our reading it discusses how increase in expected inflation cause inflation to rise as well. I think this might be a concern of the FED at some point because one of its tasks is to manage inflation and the price level. I am not exactly sure how it works, but it is definitely something to think about.
The article, like the previous commenters before me have discussed has raised some interesting but somewhat controversial ways of using fiscal policy to increase consumption. It makes logical sense that giving more disposable income to the poor will result in more overall consumption, than if given to the rich. The poor have a higher marginal propensity to consume. Although ideally these different policies could be in-acted and help the overall economy and counteract the Great Recession, it can be difficult to get support for policies like this. The rich are powerful, and do not want this to happen to them. Especially in America where people are skeptical of taxation overall I can see this as a problem. These seem to me like great ideas in theory but they might be a little bit troublesome to implement.
Reading this article after watching the movie on the Federal Reserve last night, gave me a slightly different perspective. The movie was definitely more critical of the Federal Reserve, but this article also points out some relevant flaws in its monetary policy throughout the years. I think at times the movie might have been too harsh saying decisions of the federal reserve were catastrophic. This article points out that the FED has at times been too timid in its policy and at times been to proactive in its policy but usually acting more timid than proactive. Monetary policy can cause changes in inflation and unemployment and stabilize things. Although at first the FED was skeptical of how effective monetary policy can be Chairs like Paul Volcker have shown that it really can improve things in the long run. I think the most important thing from this article is that the FED takes into account what has happened in the past when making decisions. The situation is never exactly the same, but looking at the past and the results of decisions in the past can lead to more informed decisions in the future.
The constant discussion about the interplay of inflation and the state of the economy as a whole, especially inflation and unemployment is crucial in macroeconomic policy. Right now the government is keeping that steady rate of 1-2 percent inflation but in doing so it is hard to fix the recessionary gap that has occurred since the end of 2008. This article argues with higher inflation the recessionary gap will be more easily fixed and the potential for investments will increase because the interest rate could in theory go to a negative number and be less than 0. People also might want to spend more instead of save their money because the value of their money would decrease over time. With any decision about trying to influence the macroeconomic economy as a whole there are definitely trade offs. This article like the other commenters mentioned did not focus very much on those trade offs and both situations should be very carefully considered before anything is done.
This article gave some intriguing statistics about unemployment. It seems to be increasing but not at a speed that is considered acceptable by the author. I think one of the most interesting comments in the article was the idea that the economy has slowed during the third quarter and "this is before any negative affects of the government shutdown." The government shutdown had many unintentional affects and I think a slight slowdown of the economy and therefore a related increase in unemployment are two significant consequence. We should definitely look and see how these play out in the long run. Maybe use what happens as an important factor that politicians should consider when faced with the possibility of another government shutdown. In response to Jacob I agree that it is fine to put an emphasis on people with less than a high school education and their employment status. This although maybe a smaller area is still an important area. If we could get people with less education to have jobs and/or get those same people to get higher levels of education that could be a definite step in the right direction. We could be very optimistic about the future if such things happened. On a different note there are many components that play into unemployment statistics and the underemployed is a group that should be looked at more. Like Jacob says it is acceptable that the number of underemployed has not increased but there is no telling what will happen in the future with this and the Affordable Care Act. Also it would be better if the number of underemployed went down instead of stayed constant.
Agreeing with the comments before me I do think that Goleman raises some interesting points about the empathy of the wealthy. I do not think that it is as soon as someone becomes wealthy that person forgets how to empathize. That does not seem very logical because I think at least there is some emotional and genetic component to being empathetic. At the same time if one grew up only wealthy or one had been wealthy for a long time a disconnect might grow between that wealthy person and normal people. I think it is less about not being empathetic and more about not know what it is that is troubling the people that are poorer because of this there might be less empathy. Maybe though part of caring about others is even if you don't know the exact problems of the people poorer than you you try and help them and pay attention to them, learning about their problems. It is harder to explain this part of the story. One thought is these people have their own worries too and do not have time to spend learning about other people's problems. Anyways the example Goleman gives about the neighbors know about each other and helping each other out in the afternoons only seems to be people of the same economic status who have similar problems helping each other out, not different economic statuses helping each other out. Maybe the rich people know each other's problems and help each other out that way. This is a very interesting idea and it is not to say that wealthy people do not care because they do spend a lot of time and money trying to help others through foundations they start and more.
This article gave some very interesting insights on how meditation works as well as how it applies to the meditation we practice at the beginning of class. When the article talked about "efforting" it made me immediately think of the breathing exercise that we sometimes listen to. The woman speaking in the exercise mentions if you notice your mind wander acknowledge that it is wandering and slowly bring your mind back to medication. She does not want people to get mad at themselves, or to try and work really hard to not think about things. I think efforting is what she is getting at because when people try to hard to meditate or not think about distractions the meditation does not work. Efforting hurts the meditation process and causes increased activity in the brain, when we want decreased activity for meditation. After reading this I feel that my understanding of meditation and what works best is more clear. Another interesting thing in the article was the new technique for measuring brain activity in the posterior cingulate cortex. Using an average of brain activity and instead a shorter but more detailed time period allowed the experimenters to learn more about what was going on in the brain at different points of meditation. When people described what was happening in their brain at each point in time, scientist could much better understand how that affected the brain. One other thing I was intrigued by was the idea that even experienced meditators had time meditating and describing their meditation experiences in longer periods of time than one minute. This new research will definitely bring new ideas and insights into mindfulness.
Reich definitely makes some interesting comments about the "free market." Most people do seem to think of the idea of a free market as a market in which the government has little control and private businesses and people make their own decisions about what to do which affects the market. Reich really does make you think though like the people before me said when he describes the free market as having lots of rules because as I mentioned that is not how most people see it. Unlike the other students I sort or understand why he chose not to propose solutions or methods to fix the free market. He wants people to decide individually what type of market they want (a market designed to maximize efficiency, a market designed to maximize growth, a market designed to maximize fairness, or another market) and after they decide what type of "free market" they desire they can then look at policies and ideas that will fix things. The article was very interesting and he seems to have lots of ideas whether he expressed them in words or let the readers think about them.
Toggle Commented Sep 17, 2013 on Link from Twitter econ 102 at Jolly Green General
Although this article is brief it brought up some very interesting ideas. Krugman is of the economic mindset that government spending as a whole helps the economy or at least the government cutting programs and spending does not really help things. With Keynesian ideas the economy will eventually correct itself even if those "austerity measures are never reversed." The thing that is wrong though and that he has a problem with is politicians jumping to conclusions after one example where austerity changed economic growth and actually helped it. The politicians think they understand and know economic trends just from this one example. One example or one time when it worked is not enough, there needs to be maybe an economic model to describe what happens to growth when there is austerity or some overarching idea that might explain this (instead of one example). Economists seem to look more at the big picture and long term effects to see what happens as a whole and in general as opposed to one specific time when austerity helped economic growth. This seems to work better overall and is what I think we will be looking more into in macroeconomics: less specific cases and more how things affect the economy as a whole.
Toggle Commented Sep 12, 2013 on Your Textbook Author.... at Jolly Green General
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