Neil Irwin admitted that his "average" calculations included the wages of CEOs and high paid executives. When Mr. Dudley claims "average hourly earnings were up quite a bit", we know that the regular workers are not getting pay raises. It's only the CEOs and high paid executives taking everything.
Quit using "weasel words" to keep typical workers wages low.
Quit using "weasel words" to keep typical workers wages low.
Great interview with Mr. Dudley. It's nice to hear from the experts on how the economy is actually doing, versus the noise in the political arena from the Right.
1
"we’re not really certain where the full employment rate is — we’re approaching the full employment rate at a very shallow angle of attack."
Not sure what the last part of that sentence means, but I will know we have reached full employment when I am able to get a full time job again for more than what my part-time job pays. (I being a 55 year old woman who is not in a diabetic coma, or in a wheelchair or "elderly" as you Millennials like to call us).
When that happens, I will let you know that we are at full employment. It won't happen though because employers will have to be out trying to head hunt ditch diggers for it to be good enough to pull me in (certainly no library will hire me full time. And though I would gladly work ANOTHER part time job, the schedules are so erratic that they cannot be reconciled with my existing job).
Everything this guy says would be reassuring if I believed it. They just don't want us to pull our money out because they need suckers to hold the bag while the insiders pull the rug out.....AGAIN! How stupid do we have to be?
If someone doesn't bail us out, we might pull the lever for Trump even though he scares me. Anything that can blast through this clueless status quo is fine with me.
Not sure what the last part of that sentence means, but I will know we have reached full employment when I am able to get a full time job again for more than what my part-time job pays. (I being a 55 year old woman who is not in a diabetic coma, or in a wheelchair or "elderly" as you Millennials like to call us).
When that happens, I will let you know that we are at full employment. It won't happen though because employers will have to be out trying to head hunt ditch diggers for it to be good enough to pull me in (certainly no library will hire me full time. And though I would gladly work ANOTHER part time job, the schedules are so erratic that they cannot be reconciled with my existing job).
Everything this guy says would be reassuring if I believed it. They just don't want us to pull our money out because they need suckers to hold the bag while the insiders pull the rug out.....AGAIN! How stupid do we have to be?
If someone doesn't bail us out, we might pull the lever for Trump even though he scares me. Anything that can blast through this clueless status quo is fine with me.
1
Dudley is merely carrying the water for goldman.
1
The Fed has done an amazing job in spite of an awful tax code that relies on the job killing payroll taxes and an income tax with tax expenditures (a/k/a loopholes) that exceed revenue. Solace has been consistently found in balance sheets which show individual wealth growing in excess of GDP – “their balance sheets look better than they did a few months ago”. The pie continues to grow but 10% of the population have 75% of the pie and their share continues to increase. The rich can afford to invest in secure low interest treasury bonds and the rest of the population must gamble or hide their modest savings under the mattress because savings accounts no longer exist.
It is not the Fed’s job to tell Congress how to tax but imagine if all three tax bases were used: net wealth, consumption and income. The first benefit would be that the rates would be mathematically as low as possible. The second benefit would be the elimination of ($1.3 trillion) tax expenditures which are not needed when rates are low. The third benefit would be the replacement of the job killing payroll taxes.
Next imagine how the economy (or at least the Fed mandate of employment and price stability) might be controlled by simply tweaking the percentage of revenue from each tax base every quarter. Total revenue would not increase or decrease except as Congress determines. Wall Street and the big banks would no longer be the “transmission mechanism for how monetary policy affects the economy”.
It is not the Fed’s job to tell Congress how to tax but imagine if all three tax bases were used: net wealth, consumption and income. The first benefit would be that the rates would be mathematically as low as possible. The second benefit would be the elimination of ($1.3 trillion) tax expenditures which are not needed when rates are low. The third benefit would be the replacement of the job killing payroll taxes.
Next imagine how the economy (or at least the Fed mandate of employment and price stability) might be controlled by simply tweaking the percentage of revenue from each tax base every quarter. Total revenue would not increase or decrease except as Congress determines. Wall Street and the big banks would no longer be the “transmission mechanism for how monetary policy affects the economy”.
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Adding a consumption (aka national sales or value added)tax would enable lower payroll and income taxes along with tax simplification. And revenues could be used for deficit reduction and infrastructure, etc. as well.
What you do not want is a political body like Congress tweaking the rates every few months.
Some infrastructure spending and tax policy should be left to a quasi independent board analogous to but separate from the Fed.
What you do not want is a political body like Congress tweaking the rates every few months.
Some infrastructure spending and tax policy should be left to a quasi independent board analogous to but separate from the Fed.
We need to have a corporate tax and other business taxes structure that brings the $ back from overseas. A lower % of a large number is better than a larger % of zero.
" So I think the U.S. economy is still on a decent trajectory, above-trend growth,"
He used the word "above trend" 4 times. How is less than 2% GDP growth rate above-trend in any way? Wasn't lats quarter's GDP growth rate something like 0.5%. Mr. Dudley's required upbeat attitude cannot mask the reality that the US economy has experienced slowest growth rate over the 8 years since the great depression. If 1.5%-2% annual GDP growth is the new "above trend" we've got a problem.
He used the word "above trend" 4 times. How is less than 2% GDP growth rate above-trend in any way? Wasn't lats quarter's GDP growth rate something like 0.5%. Mr. Dudley's required upbeat attitude cannot mask the reality that the US economy has experienced slowest growth rate over the 8 years since the great depression. If 1.5%-2% annual GDP growth is the new "above trend" we've got a problem.
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I don't see any reasonable explanation for the prime rate at 25 basis points. That is flat out a subsidy for large banks and the financial sector. It causes huge distortions in the markets. A responsible plan for the Fed is to release a schedule for raising rates to 2-4% over 1-2 years. Otherwise, as the interview implies, they have no leverage when the next recession comes, and it will come; perhaps from unforeseen places. Mr. Dudley is in denial and that is a little scary for a leading Fed policy maker.
2
This sounds like an excellent way to ensure that the next recession comes sooner rather than later.
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I agree. However 2%-4% in 1-2 yrs would TANK the economy a la Ben Bernanke's 8 consecutive 25 bps increases. The issue with employment is also a structural issue as MANY are essentially barely literate while the skills required continue to advance due to technological innovation. Also, Payroll Tax and healthcare costs are serious impediments to employment gains. I do think we need to see savings rates within that level, however, it will take some time to get there without rocking the boat.
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"There’s absolutely nothing about the stock market, there’s nothing about Wall Street in our dual mandate."
It's encouraging to see the vice-chair of the FMOC acknowledge this explicitly, though I remain skeptical that he really believes it and bases his advice on it. If he really believes it, why is he calling for the Fed to be allowed greater discretion in lending to entities that are involved in trading securities? Why not simply jack up their capital requirements?
It's encouraging to see the vice-chair of the FMOC acknowledge this explicitly, though I remain skeptical that he really believes it and bases his advice on it. If he really believes it, why is he calling for the Fed to be allowed greater discretion in lending to entities that are involved in trading securities? Why not simply jack up their capital requirements?
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Stock Market or Wall Street cannot be the main focus. So Dudley is right. The main theme is the job market, and with the consumption picking up slightly more than the present level would increase the GDP. Obviously, it is construed that there would also be a commensurate wage growth. Some amount of fiscal prudence is also necessary to increase the investment on infrastructure that is a standard route for GDP growth. So far jacking up the capital of the Banks is concerned , the capital adequacy norms have been implemented in phases since 2009 and in the ongoing Fed's audit of complying Basel III norms should hopefully yield some better results
1
while high capital requirements discourage risky trading, they can also reduce appetite for lending, which can hamper growth
1
Dudley: "As I’ve said many times, there’s something fundamentally unfair about the fact that large firms had to be rescued to prevent the financial system from collapsing as people lost their homes and jobs." Most people understand that the financial sector had to be rescued to save all of us from economic armageddon, but what people don't understand is why, when the economy is strong, the financial sectors is allowed to make such enormous profits from it, then when the economy falls into recession, or worse, a financial crisis, the financial sector is rescued by the government. It's a heads I win tails I win scenario that people resent. If the financial sector is so important it must be rescued by government, it ought not be allowed to realize enormous profits during the good times.
9
To be sure, the US automobile industry was rescued as well in 2009.
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They didn't have to be rescued. Bankruptcy in these cases would have been Better.
I believe Dudley warned about the state of euro banks recently. The type of warning Geithner gave to US banks before the 2008 crisis. Why did he do that?
4
Well, maybe because Dudley learns from the past? I don't know, but we will have Greece II next month.
1
The US economy is relatively healthy and far less impacted by the relative strength of the USD than most nations are to their own domestic currency.
The Fed's mandate of full employment and price stability are met.
Increasingly global central banks have been adjusting monetary policy to each new crisis, using a "beggar-thy-nation" approach of currency depreciation.
With real and nominal rates below 0% in many developed economies, we are in uncharted waters filled with sharks.
First and foremost, interest rates are reducing the cost of production far more than they are stimulating aggregate demand.
One could argue they are undermining aggregate demand through a tax on money and savings, and marginal productive capacity is no longer constrained (by the 0% lower bound) to be in constructive endeavors.
In other words, the central bank is now essentially managing resources by committee through monetary policy measures.
The economy will suffer the fate of all centrally managed economies - underperformance.
Post-Brexit, the BOE and the ECB have their hands tied. The BOJ is dealing with massive unwanted strength in the yen.
If the Fed is to avert a chain of "beggar-thy-neighbor" monetary policies, it must do what only it can do - begin the difficult but necessary process of rate normalization.
Otherwise, the world will sink into a quicksand of negative interest rates.