flow5
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Joined: Dec 20, 2010 21:18:02 GMT -5
Posts: 1,778
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Post by flow5 on Jul 16, 2015 12:39:25 GMT -5
It is axiomatic, with limited upward and downward price flexibility (nominal rigidity), unless money, and money flows (money times velocity, viz., AD), expand at least at the rate of “asked prices”, output can’t be sold, jobs will be lost, and incomes will decline.
The U.S. will inevitably enter a recession in the 4th qtr. of 2015. There will be a “flash crash” in commodities in Dec.
parse, dt, real-output, inflation proxies…
Mankiw Rule Tells The Fed To Tighten [View article]
August CPI falls (-) .02 percent.
1/1/2014 ,,,,,,, 0.158 ,,,,,,, 0.344 ,,,,,,, 0.417
2/1/2014 ,,,,,,, 0.126 ,,,,,,, 0.381 ,,,,,,, 0.410
3/1/2014 ,,,,,,, 0.139 ,,,,,,, 0.315 ,,,,,,, 0.407
4/1/2014 ,,,,,,, 0.154 ,,,,,,, 0.333 ,,,,,,, 0.402
5/1/2014 ,,,,,,, 0.146 ,,,,,,, 0.390 ,,,,,,, 0.397
6/1/2014 ,,,,,,, 0.128 ,,,,,,, 0.344 ,,,,,,, 0.395
7/1/2014 ,,,,,,, 0.168 ,,,,,,, 0.337 ,,,,,,, 0.387
8/1/2014 ,,,,,,, 0.128 ,,,,,,, 0.300 ,,,,,,, 0.378
9/1/2014 ,,,,,,, 0.125 ,,,,,,, 0.309 ,,,,,,, 0.368
10/1/2014 ,,,,,,, 0.047 ,,,,,,, 0.267 ,,,,,,, 0.357 gDp falls
11/1/2014 ,,,,,,, 0.051 ,,,,,,, 0.258 ,,,,,,, 0.347
12/1/2014 ,,,,,,, 0.063 ,,,,,,, 0.195 ,,,,,,, 0.338
Sep 17 2014 09:12 AM
parse: dt, real-output, inflation
01/1/2015 ,,,,, 0.13 ,,,,, 0.31
02/1/2015 ,,,,, 0.09 ,,,,, 0.31
03/1/2015 ,,,,, 0.10 ,,,,, 0.29
04/1/2015 ,,,,, 0.08 ,,,,, 0.27
05/1/2015 ,,,,, 0.05 ,,,,, 0.29
06/1/2015 ,,,,, 0.06 ,,,,, 0.25
07/1/2015 ,,,,, 0.06 ,,,,, 0.24
08/1/2015 ,,,,, 0.02 ,,,,, 0.21
09/1/2015 ,,,,, 0.02 ,,,,, 0.22
10/1/2015 ,,,,, -0.05 ,,,,, 0.17 recession
11/1/2015 ,,,,, -0.02 ,,,,, 0.16 recession
12/1/2015 ,,,,, -0.03 ,,,,, 0.08 recession
Relative order of weakness in 2015 as contrasted to 2014:
1/1/2015 ,,,,, -0.03 ,,,,, -0.04
2/1/2015 ,,,,, -0.04 ,,,,, -0.07
3/1/2015 ,,,,, -0.04 ,,,,, -0.03
4/1/2015 ,,,,, -0.08 ,,,,, -0.07
5/1/2015 ,,,,, -0.09 ,,,,, -0.10
6/1/2015 ,,,,, -0.06 ,,,,, -0.10
7/1/2015 ,,,,, -0.11 ,,,,, -0.09
8/1/2015 ,,,,, -0.12 ,,,,, -0.10
9/1/2015 ,,,,, -0.08 ,,,,, -0.06
10/1/2015 ,,,,, -0.09 ,,,,, -0.09
11/1/2015 ,,,,, -0.08 ,,,,, -0.11
12/1/2015 ,,,,, -0.10 ,,,,, -0.13
When money flows (proxy for inflation), falls from 22 to 8 within a couple of months, then commodities will be hard hit (it took 2 years for the same equivalent prior deceleration, from Jan 2013 to Dec 2014, and that collapsed the oil market and sent the dollar soaring). That type of price-level change coming on the back of the recent 4th qtr. 2014 decline, portends a depression-like deceleration.
All CB time/savings deposits are derived deposits. As TDs grow, DDs shrink pari passu. All time/savings deposits are the indirect consequence of prior bank credit creation (loans=deposits, viz., “bank credit proxy”).
The source of TDs is DDs, directly, or indirectly, via the currency route, or thru the CB’s undivided profits accounts – as anyone who has applied double-entry bookkeeping on a national scale should already know. And why should the CBs pay interest for something they already own?
There are now + 10 trillion dollars of savings impounded within the confines of the CB System. DDs were 77 percent of TDs in 1959, and were 10 percent of DDs in 2008 (and that doesn’t include “saved” DDs).
From the standpoint of the entire System of banks, the CBs do not loan out existing deposits, saved or otherwise, they always create new money, DDs, somewhere in the System, when they lend/invest.
From the standpoint of the System, the savings practices of the non-bank public are reflected in the velocity of their deposits, not in their volume. Whether the public saves or dis-saves, chooses to hold their savings in the CBs, or to transfer them to the NBs, will not, per se, alter the total assets or liabilities of the CB System, nor alter the forms of these assets and liabilities.
Monetary (voluntary), savings (funds held beyond the income period in which received), are impounded within the CB System. They are lost to investment, consumption, indeed to any type of payment or expenditure until their owners/savers decide to use them. Their means-of-payment velocity is zero (why do you think Vt has drastically fallen?).
Un-used or un-spent CB held (bottled up), savings are a non-recognized leakage in Keynesian National Income Accounting procedures. The growth of TDs shrinks AD, and thus R-gDp. This exerts a dampening, contractionary, or net deflationary impact on prices, production, jobs, wages, and salaries.
As the ratio of NB to CB lending shrinks, so will the economy as the utilization of savings, the circuit income and transactions velocity of available funds, shrinks.
This decreases the supply of loan funds, increases the capitalization rate on earnings, and increases the level of long-term interest rates relative to what they would otherwise be. It decreases NIM for both the NBs and CBs. I.e., the welfare of the CBs is dependent upon the welfare of the NBs.
The payment of interest on ‘excess’ reserve balances acts the same way as deregulating interest rates for the commercial bankers did. Raising Reg. Q ceilings for 5 consecutive times was the caused Stagflation (as predicted in the late 50’s).
The IOeR policy rate inverts the short-end segment of the NBs wholesale funding yield curve. It induces dis-intermediation (an outflow of funds or negative cash flow) for the NBs singularly. Whereas dis-intermediation for the CBs isn’t predicated on the level of interest rates. The CBs could continue to lend even if the non-bank public ceased to save altogether…
Lending by the CBs is inflationary, whereas lending by the NBs is non-inflationary, other things equal. And it takes increasing infusions of Reserve Bank Credit to generate the same inflation adjusted, dollar amounts of gDp. Since the Great-Recession, we had (1) “reflation” @ + 0.103 – PCE, but (2) real-output has lagged @ +0.088, – R-gDp, i.e., we got stagflation (business stagnation accompanied by inflation). This trend should accelerate.
Raising the remuneration rate will cause an economic depression.
See: “Profit or Loss from Time Deposit Banking” — Banking and Monetary Studies, Comptroller of the Currency, United States Treasury Department, Irwin, 1963, pp. 369-386.
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IF THE FEDERAL RESERVE INCREASED INTEREST THEN M3 COULD SEE SOME INTERESTING EVENTS IN THE 2016 Q2 ( MAY 2016). MMXVI-ALPHA SHOWS A NEGITIVE CORRELATION FOR M3 THE INTEREST ON 30 YEAR T-BOND. 
We are more then20% cash.
