Atlanta Fed president Dennis Lockhart says Bar High for Not Hiking Rates Next Month.
Lockhart, who is retiring in February, also made an amusing comment about willingness to run the economy extremely hot.
Federal Reserve Bank of Atlanta President Dennis Lockhart signaled the U.S. central bank was on track to raise interest rates next month, provided nothing intervened to give policy makers “pause.”
“There’s a relatively high bar, at least in pure economic terms, a relatively high bar to not moving in December,” Lockhart told reporters Friday in Orlando, Florida. “There are other things that go on in the world that could give pause and I don’t completely rule them out,” he said, without providing specifics.
Lockhart, who retires in February after 10 years at the helm of the Atlanta Fed, said he was “ambivalent” on the idea of pushing unemployment well below what’s viewed as its lowest sustainable level. He is not a voter on the FOMC this year.
“I would be open to some of what you might call running the economy hot if you were talking about a relatively mild form of that idea that is not really risking undesired inflation rising rapidly,” he said.
Kaleidoscope Eyes
Recall that Lockhart gave a speech on March 21 called “Kaleidoscopic Context for Monetary Policy.”
In his speech, Lockhart cited “sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April.”
I commented on his speech with my take called Kaleidoscope Eyes.
On July 21, Lockhart was yapping about multiple rate hikes this year. For details, please see “The hikes are coming! The hikes are coming!”; Kaleidoscope Eyes Revisited.
Lockhart will be missed. He provided much needed comedy in an otherwise dull set of Fed commentators.
I offer this musical tribute.
Mike “Mish” Shedlock
It is tragic these morons are even paid.
Agree, he is a moron. Their genius is in figuring out how to do nothing but make it sound like a new idea while looking like they are in control and not fully subordinate to the upper 1%.
The Fed can only do about 10 things with respect to monetary policy, maybe less. This list can be written down on a scrap of paper with lots of room left over. Their challenge is making this short list look impressive and thinking up new reasons to ,,,
Raise or lower short term interest rates
Raise or lower long term rates via bond purchases / sales
Increase / decrease reserve requirements
Increase / decrease a couple of other things that slip my mind at this time.
Making changes up / down in that short list while making it look like rocket science is an art, not a science. It plays to the greed of those at the top and the gullibility of those at the bottom, which is defined as the not upper 1%.
If the new menu selection is allowing long term rates to rise while controlling short term rates, via claiming to not care about hotter than usual inflation, then this ok by me. The short term asset flipping set can have their candy. I will see higher long term interest rates so I can invest in bonds and spend said interest.
However, they will still need permission from the upper 1% to follow through on this feeler of his.
Still expecting the Lucy – Charlie Brown – pulling of the football this December. If Hillary wins, it will be business as usual supporting the upper 1% as they want to be supported. If Trump wins, it will be to save us from the unknown but certainly bad, until the upper 1% say otherwise.
No matter what the FED does, and no matter what condition the economy is in, if Trump wins we’ll see lots of news about how terrible the world is. If Hillary wins it’s all “happy days are here again.”
Look at the 1980s. Reagan’s treasury and Volker’s FED brought inflation in line, allowed people like my father to safely save up for a pretty good retirement. All the while everything was gloom and doom on TV.
Agree.
If Hillary wins: Fed – World is A-OK, no reason to change anything
If Trump wins: Fed – World is in big trouble. Can’t change anything.
Talking heads will imply otherwise monthly. No changes until upper 1% order them. Flipping paper assets pays some people too well to stop the music any time soon.
Mish – Any thoughts on the market’s recent losing streak, not seen since 1980? It will be fun to watch the chicken-little-esqe sky is falling reaction when Trump wins come Wednesday morning.
Also, here’s a similar musical tribute. https://www.youtube.com/watch?v=0saZiLV7-7E
I hope for a Trump win, a 15% drop of the stock market and everybody yelling for a huge crash. It will be a great buying opportunity.
“Any thoughts on the market’s recent losing streak, not seen since 1980?”
A losing streak that hasn’t even brought the market to the Brexit low, so of what significance is the length of the streak? On October 19, 1987, the DOW dropped a record 22% in one day. The streak, not seen since 1980, isn’t even close to that one day percentage drop, yet. Pundits pontificate a 10 to 15% drop if Trump wins.
They now want a steeper yield curve to boost bank profitability (carry) and to relieve some of the burden on insurance companies and pension funds caused by EIGHT YEARS of zero interest rates.
The fact that they waited EIGHT YEARS to even begin to “normalize” interest rates has left them in the untenable position of having to justify raising interest rates at the very tail end of an economic cycle – and the weakest one on record, at that.
Of course, to anyone with any economic/financial sense at all, these justifications are pure, unadulterated nonsense.
Low interest rates have been fabulous for the banks and insurers by propping up their margins severely. Its the higher rate environment that should terrify banks and insurance companies as they will no longer earn in excess of the coupon rate on their fixed income investments that they roll over prior to maturity. Plus equities will suffer.
People who say that pensions have suffered under ZIRP are speaking complete and utter nonsense. The math just doesn’t support such. If you think there’s solvency problems right now, you ain’t seen nothing yet with higher rates.
You kind of get it.
Assuming a large change in policy that altered rates and/or purchases dramatically (not likely but just assume), the Fed and their consulting ‘economists’ would justify it with some made up bullsh*t that sounds mathy and scholarly. They would all get their story straight first and that would be the line to use every time someone wanted an explanation.
I have a BS in economics (no pun intended, from 40+ years ago). I had to take some math econ courses but 40+ years ago realized they were BS. Economics is useful to know but it could be taught comprehensively as a minor as there is not enough genuinely useful material for a full major or beyond.
The key to the BS is ‘Ceterus Paribus’. It means ‘holding all other things constant’, more or less. Basically, all econ studies measure variables while holding much of the world constant. Thus, if any of the things held constant affect the result, you would never know since by definition, it wasn’t directly measured. You might get a vague statistical number that implies the effect unmeasured variables had on the result, but, by definition, that is pure BS. How can one know the effects of what wasn’t measured? Pure bullsh*t, but seriously mathy.
Wait – just did the math. 30+ years ago. Senior moment.
Econ teachers use the phrase ‘ceterus paribus’ all the time. The bullshi*t artists who fill in time on TV or affect policy for government kind of chuckle when they occasionally repeat it. Otherwise, it’s pretty much a toxic word pair in the profession, almost banned terminology out in the real world.
Last post:
Yes, you might say, if the probability measured is .96, then that’s pretty good.
I call bullsh*t. Was the .96 due to coincidence, correlation, or cause and effect, or made up numbers? “Yes, more studies are needed” is the standard reply to simple questions like this. Then, since you are powerless to get at the truth and change what the upper 1% really wants, you just have to live with it. If your career depends on media, you just go along or become unemployed. Those are the simple choices for those in media. Your’s and mine simple choices allow going along with it only.
“The key to the BS is ‘Ceterus Paribus’. It means ‘holding all other things constant’, more or less. Basically, all econ studies measure variables while holding much of the world constant.”
In a cycle, there is nothing constant, except the movement of the phase of the cycle, a degree at a time. An up phase begins, accelerates, slows, then inverts, following the same in reverse. It is the same thing, over and over again. Variables will distort the cycle, but the phases remain the same. The virtuous circle and vicious circle follow each other, as night follows day. “Beggar thy neighbor” and “race to the bottom” become part of the depression phase of the long term cycle.
Kondratieff didn’t invent the Kondratieff cycle, he simply became famous for recognizing a cycle that had existed from Biblical times. Volker “rediscovered” the business cycle, which had never gone away, in the first place.
Once upon a time, I would have agreed about the “all things being equal comment.” Used to make me nuts. As I got better at this stuff, I realized the true humor is in the amount of variables, with each individual variable already being naturally unstable to begin with.
But I also learned that you can fill a room with 100 people. Say 25+36=71, and maybe someone catches it. So throw in a few sigma signs and a pi sign and your BS is almost gold.
“The true humor is in the amount of variables, with each individual variable already being naturally unstable to begin with.”
Nobody is supposed to notice that. That’s probably what all the spurious sigmas. pi symbols, and Kurgmanesque bullsh*t is for. What if someone could figure out how to sue economists who spin bullsh*t? Wouldn’t it be cool to see a theory of fraud and monetary loss (damages) be tested just to see a few slags from the upper 1% cr*p their pants? This is utterly possible if someone can find a strong linear thinker who understands BS, fraud, damage, and can find someone vulnerable who is holding a/the bag with their pants down around their ankles. The best way to end the Fed’s destruction of our economy is to destroy the theories they rely on. Chipping way at the base will topple the ivory tower. Where’s the vulnerability? Lots of money to be made in contingency fees if this nut can be cracked.
Pensions and the massive losses ahead are a good first step. Reliance on one set of future assumptions that are replaced by jackass thinking concocted to support paper asset flipping … for 8 years … is a foot in the door. Does the Fed have a legal liability to act not stupid, for lack of a better phrase?
Contingency- doubtful.
Destroy their theories – doable.
It is clear that the ‘Powers That Be’ are pulling out all stops to save the ‘Status Quo’ that supports them.
Civil Unrest and War risks are high.
Clinton is still likely to win and then face Impeachment.
Alliances are changing as some Asian states turn away from the U.S. and embracing China as some NATO states embrace Russia.
This is a new dangerous age.
Violent ups and downs in the markets will follow as well as the destruction of the bond market which is many times larger than the equity markets.
Gold will not save you, but could provide a limited safe haven. (Keep it under 10%.)
The big money cannot invest in gold but can invest in miners. But basic minerals look better than money substitutes like gold and silver. (But silver remains useful for medicine and solar.)
Wild times ahead. Have cash on hand to play.
Mish, this one’s off the subject but it’s about Nate Silver’s pissing match with the Huffington Post. Kinda funny really.
Nate Silver Goes to War With HuffPost Writer: ‘You Have No F*cking Idea What You’re Talking About’
http://www.mediaite.com/online/nate-silver-goes-to-war-with-huffpost-writer-after-highly-critical-column/
Hilarious -Thanks
So they are showing truly the nature and vulnerability of a set of data in a statistical model. I mean yes these are the best tools available to us and science strives to make them better but this is, for better or worse, exactly the uncertainty of these types of forecasts at one fixed point in time.
The nature of these models is to modify over time and to eventually reach a reasonable mean (or range) of expected results. Yet the climate agenda has completely ignored the nature of the statistical models of climatology and how they will eventually work the same way. I see 20 years from now this same type of argument from an agenda pushing a certain result for carbon forcing from man made emissions (Grimm), and a mathematician having to try to explain to him (Silver) why the models are modifying to a more reasonable warming scenario than what we have been hearing for the past two decades.
We can go back to the earliest days of computing.
GIGO – Garbage In Garbage out.
Remember Remember the 5th of November, Supposedly, there are police, and FBI raids going on all over the Washington DC area into Maryland and Virginia tonight over Anonymous releasing the Bill Clinton sex-with-minors/Lolita Express. I ain’t seen nothing yet and it’s real late and there’s nothing posted anywhere.
Trump’s best speech:
“I would be open to some of what you might call running the economy hot if you were talking about a relatively mild form of that idea that is not really risking undesired inflation rising rapidly,” he said.
“Coffee. It picks you up and calms you down.” False advertising slogan.
Lockhart is promoting another false advertising slogan.
The up phase of a cycle starts slowly, then accelerates. Lockhart cannot have his cake and eat it, too.
I’m confident if Trump wins the USA will be punished long and hard.
“I’m confident if Trump wins the USA will be punished long and hard.”
You might want to review what happened to Venezuela under Chavez and Maduro.
Bernie Sanders always changed the subject when asked about Venezuela. Bernie supports Hillary.
I can’t see any justification for the S&P to trade above 400. The difference between now and 1980 is USA increased the population 70 million of which all of the adults of said increase are on entitlements and do not work, also increased the national debt ten fold, said debt increase co-incides with the growth in Wall Street. It is all built on debt, which will need further increases of the population by 2% and entitlement role # increases by 2% in order to get a 2% GDP growth. It is all debt. Some feel the IMF will save the banks in 2017 using SDRs. BAHAHAHA, SDRs are derivatives of the FIAT worthless currencies and nothing is backing any of it.
By not demanding the right kind of growth and simply throwing money at problems we have delayed and are adding to a much larger crisis lurking in the future. Many of those already concerned about the strength of the economy and they will find little comfort in recent remarks made by Oliver Blanchard. He thinks the economy remains to weak to raise rates.
Worries exist as to just how much ammunition remains in the arsenals of the central banks. I find very troubling the argument that conditions remain too fragile to begin a return to historic norms. Also, questions remain as to whether the world can handle additional government debt when rates begin to rise. More on this subject in the article below.
http://brucewilds.blogspot.com/2016/11/interest-rate-hike-if-not-now-when.html